Emerging fund managers often seek an experienced capital raiser to expand their investor base and handle outreach, follow-ups, and updates. However, hiring a commission-only professional can present unique challenges. While this approach appears financially efficient—rewarding success without straining cash flow—it often fails to attract top talent.
The Common Struggles with Commission-Only Roles
- Candidates Bear All the Risk
- Market conditions fluctuate, and deal flow may slow down, leaving commission-only hires without income.
- The risk isn’t just on the employer’s side; the hire must assess whether they can generate revenue in this role.
- Experienced Candidates Have Options
- Skilled capital raisers weigh compensation, track record, and market positioning before committing.
- Pure commission roles may indicate a lack of confidence in the firm’s ability to attract investors, making salaried roles more appealing.
Many firms wait months searching for a commission-only hire, preferring exclusivity over engaging third-party marketers. While founders and external channels may continue fundraising, hiring an in-house capital raiser can improve investor reach and free up valuable time. But emerging managers must consider more flexible compensation structures to widen the candidate pool.
Workarounds to Attract Stronger Candidates
Hybrid Compensation Models
Instead of a strict commission-only approach, consider offering:
- A modest retainer or draw against future commissions to provide security.
- A high-performance-based commission structure with a potential bonus or carry.
- Salary draws, though potentially off-putting to some, may be necessary to attract the right candidate.
Transitioning Third-Party Marketers into Employees
- Engage independent marketers on a commission-only basis, with a structured pathway to full-time employment.
- Define milestones that trigger a transition, including investor commitments and fund performance.
- Outline the potential full-time package, including salary, carry, and long-term incentives.
Final Thoughts
While these approaches may not fully solve the talent acquisition challenge, they provide emerging managers with more hiring options. Finding the right balance between risk and reward will help attract quality capital raisers while maintaining financial stability in the early growth phase. A well-structured hiring approach can make all the difference in securing the right talent to drive your fundraising success.