US retail investor channel fundraising: How to raise private equity capital from “main street” investors

16 October 2024
spotlight_insights_11.jpg
Fund sponsors are increasingly interested in marketing their products to “main street” investors in the US through a network of wealth advisors.

Fundraising through the retail investor channel, however, is very different from fundraising through institutions. In retail investing, fund sponsors sell investments in private equity to individual investors through independent broker-dealers (IBDs) and registered investment advisors (RIAs).

To get a fuller understanding of retail investing, we interviewed Matt Podolsky, Vistra vice president of sales, who has over 20 years of experience in the US retail investor channel. He discusses the realities of entering the retail investor space, the costs of marketing to financial advisors and realistic timelines fund sponsors should keep in mind when gaining traction in this channel. 


Entering the retail sales channel sounds complex and expensive. Why do companies pursue this, and is the time and financial investment really worth it?

Absolutely, but it requires careful consideration. Many companies see the retail or broker-dealer channels as untapped sources of capital, but these spaces are not easy to penetrate. Success here demands substantial time, effort and money — and if you go in unprepared, the result can be costly mistakes. I’ve seen sponsors spend a year or more pursuing sales, only to end up with zero capital raised. That’s why you need the right strategy and expert guidance from the start.

What kind of timeline should companies expect when entering these channels?

You should expect it to take at least 12 months to gain meaningful traction. This timeline involves multiple steps, including meeting regulatory requirements, building a solid team and establishing key relationships with independent broker-dealers and registered investment advisors. Even with the best product and market timing, companies must clear multiple hurdles — such as meeting the compliance expectations of IBDs — before they can generate any sales. So, patience is essential. If you're not ready for a long-term commitment, the channel may not be the right fit.

What does the cost structure look like for this process?

Costs depend on how aggressively you want to scale. A reasonable estimate for companies aiming to raise $25 to $100 million is an investment of around $1 million. This figure covers essential services like a securities attorney, a transfer agent, marketing efforts, third-party due diligence and participation in key industry conferences. You’ll also need experienced salespeople, called wholesalers, to build relationships with financial advisors. Some companies try to cut corners, but in my experience, investing strategically from the beginning leads to faster, more sustainable results.

Is it possible to succeed with a smaller budget?

Yes, but it’s rare. One of my clients managed to raise $30 million in their first year with just $275,000 invested, but that’s the exception, not the rule. Many successful companies spend more, sometimes as much as $2 to $3 million, by hiring larger sales teams to accelerate their progress. Ultimately, the investment level depends on your growth goals. If you want to scale quickly, you’ll need to allocate more resources.

How should companies approach their spending to maximise their chances of success?

The key is being strategic. For example, instead of spending money on every industry conference, focus on events where your target audience will be. It’s also a good idea to start small. You don’t need to spend heavily on sponsorships right away — sometimes just showing up, working your network and arranging one-on-one meetings can be more effective. Aligning yourself with the right service providers is also critical. Partner with consultants, wholesalers and managing broker-dealers who understand the space and can guide you through the process. These relationships help you avoid missteps and ensure your dollars are spent wisely.

What role do managing broker-dealers, or MBDs, play in this process?

MBDs are essential partners. They handle regulatory oversight and can provide back-office support. However, not all MBDs are created equal. Some have a strong retail presence and well-established relationships, which can accelerate your growth. Others might lack the necessary network, making your path more difficult. When selecting an MBD, ask for referrals from other sponsors and verify their track record. A good MBD will not only ensure compliance but also support your marketing efforts and help you connect with the right advisors.

What advice would you give to companies entering these channels for the first time?

My biggest piece of advice is to ask for help. This industry is built on relationships, and many professionals are willing to provide advice at no cost. Consulting with experienced service providers can save you significant time and money. I’ve seen companies struggle because they didn't ask the right questions or tried to handle everything in-house. Talk to MBDs, wholesalers and securities attorneys who specialise in this space. They can guide you through compliance hurdles and introduce you to the right contacts. Also, understand that building a presence in this channel takes time. The companies that succeed are those that invest in long-term relationships and continuously show up at conferences and industry events.

If a fund sponsor carefully follows the advice that you’ve outlined, what are their odds of succeeding in the retail investor channel?

While success in the retail investor market is not guaranteed, sponsors who follow this framework significantly improve their odds. Raising $10 to $20 million within the first year is a realistic benchmark for early success. Achieving this can create momentum that allows sponsors to grow their offerings over time. Given the variables, such as product type, market conditions and investment size, I couldn’t give exact odds but sponsors who invest appropriately, build strong networks and maintain flexibility have a high probability of succeeding if they aim for steady, incremental progress rather than immediate results.

Any final thoughts on what companies can do to increase their chances of success?

Yes, it’s essential to have realistic expectations about both the timeline and the investment required. Success in this space doesn’t happen overnight. It takes persistence, the right team and a clear strategy. Companies also need to be flexible — what works initially might not be sustainable as you grow, so be ready to adjust your approach. Remember, reputation matters a lot in this industry. If you build trust with investors and advisors early on, it will create momentum and open more doors down the line. Finally, surround yourself with experts and ask questions. The more you learn from others, the better equipped you’ll be to succeed.

×