Private equity's online courtship

FOR decades, private equity firms relied on highly paid middlemen to raise money. But soon, the process may be as simple as logging on to a website. In an effort to change the way the notoriously secretive industry finds investors, several startups are pitching online matchmaking services to the world's biggest private equity players. The task is daunting. Ever since the industry found its footing in the 1980s, private equity firms have relied on placement agents - essentially, middlemen - to find investors and raise billions of dollars for buyout funds, collecting large fees. The placement agents have become a powerful force, controlling access to the top funds.

Startup companies are eager to capture a share of the business by connecting investors directly to funds. The efforts come soon after a rule change that took effect in September, when the Securities and Exchange Commission relaxed an 80-year-old ban on advertising by private funds.

Now hedge funds and venture capital and private equity funds can let the public know they are looking for money, though they are still allowed to accept money only from those who are financially suited for such alternative investments.