Startups Turn to Wall Street to Broker VC Deals

For years, startups turned to Wall Street bankers either in the best of times—when they were big enough to go public—or the worst, such as when they needed to find a buyer. Now they are paying for investment bank services for a function that’s much more routine: raising early-stage venture capital.

More startups are bringing on bankers to raise Series A and B deals, the financing rounds that typically happen several years before a startup contemplates a public listing, according to bankers and startup CEOs. They’re doing so in reaction to the record level of venture money available from nontraditional investors such as hedge funds, sovereign wealth funds and private equity funds, a development that has transformed the fundraising process.

Goldman Sachs, Morgan Stanley and J.P. Morgan, as well as smaller firms such as William Blair and Jefferies, are among the banking firms startups are using to negotiate VC offers, according to people familiar with the matter. For the investment banks, assisting with fundraising is a way to establish a relationship that will help with future business, most obviously if the startup gets to a size where it can go public.