Investment banks and other consultants can plan and execute a fundraising campaign for startups and for companies in the growth phase. A reputable fundraising intermediary will likely speed up the process, reduce the legal risks, and negotiate a better deals. Most brokers will take a monthly retainer plus 5 percent to 15 percent of the investment. That may sound like a lot, but taking into account the time and risks, hiring an experienced expert can be very budget friendly.

Commission guidelines

The Lehman formula is a compensation formula developed by Lehman Brothers to determine the commission on investment banking or other business brokering services. Lehman Brothers developed the Lehman Formula, also known as the Lehman Scale Formula, in the 1970’s while raising capital for corporate clients.

Lehman Formula

The original structure of the Lehman Formula is a 5-4-3-2-1 ladder, as follows (accumulated amounts):

  • 5% of the first million EURO involved in the transaction
  • 4% of the second million
  • 3% of the third million
  • 2% of the fourth million
  • 1% of everything thereafter (above EUR 4 million)

Today, financial experts often seek some multiple of the original Lehman Formula, such as the double Lehman Formula (accumulated amounts):

  • 10% of the first million EURO involved in the transaction
  • 8% of the second million
  • 6% of the third million
  • 4% of the fourth million
  • 2% of everything thereafter (above EUR 4 million)

A more common variant used by mid-market M&A specialists and business brokers is the Double Percentage Lehman (“Modern Lehman”). Under this variation both the percentages and the scale are adjusted, instead of the percentages only. In addition, the percentage is held constant at 3% above EUR 8 million (accumulated amounts):

  • 10% of the first  million EURO
  • 9% of the second  million
  • 8% of the third million
  • 7% of the fourth million
  • 6% of the fifth million
  • 5% of the sixth million
  • 4% of the seventh million
  • 3% of everything thereafter (above EUR 7 million)

SourceInvestopedia