Private companies looking to go public as a means of financing their growth must have a committed source of financing before making such a transaction. There is a legal way, and many illegal ones, in which a company with insufficient sources of funding can seek to raise the additional capital necessary to go public.

The ability to raise capital can be critical to business growth. Private companies with great potential or a track record of success often seek public listing as a means of securing the capital necessary to fuel their expansion. But going public is simply a means of obtaining a ticker so that your investors, people who have already financed you by buying your shares directly from you, have a market to resell your shares. It is not a guarantee of securing such financing, it is not even possible to consider it as an option unless viable sources of financing are established in advance. Consulting an SEC attorney who can explain viable options in detail is vital to ensuring a smooth and legal path to securing funding.

The true ideal source, and indeed for smaller businesses, of a solid forward commitment is self-financing. An established company with more than $ 1 million a year in net earnings may be well positioned to attract serious interest from investment professionals looking for solid growth opportunities. However, smaller companies should seek out a group of committed personal contacts who are willing to make an investment if the company could offer transparency by being an SEC reporting company, as well as liquidity and a strong exit strategy when listed on bag.

So how does a company without sufficient profits or committed funding sources find the capital to go public? The law allows companies to hire third parties to help them locate sources of capital, but it imposes a very strict requirement. A business may only hire “seekers” or pay a commission or some other form of transaction-based compensation, ie compensation that is based on the success of raising money, to an entity that is a registered broker / trader. Also, commission or fees must be paid to the broker / dealer entity and not directly to the people who work for the broker / dealer.

It is easy to tell if an entity is in fact a registered broker / trader by visiting the Financial Industry Regulatory Authority website at A search on this site also allows companies to see if the broker / dealer or the people they are dealing with have had any legal or regulatory issues.

It is simply not legal to pay unregistered “search engines”, “commercial intermediaries” and other similar persons or companies to help raise funds to go public. Companies are often solicited by individuals and companies who are not registered brokers / distributors but who offer to provide services, in exchange for a commission or some other fee based on the success of the transaction, to get the company listed on the stock exchange; despite the fact that such offers are inherently illegal. Examples of such illegal services include finding investors (including as a “consultant”), making investor referrals, promoting a private placement, transacting securities for a fee (including when conducted by friends or family), or acting as an “independent contractor “not associated with a broker / dealer.

One notable exception is a special SEC rule that allows officers, directors, and employees of a private company to sell securities without registering as a broker / dealer. Details of this exception and the many other opportunities and pitfalls in raising money to go public are posted in the “How to Use Others to Raise Capital” discussion on

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