Deal marketing on the internet: Using Software to Find Investors and Sell Your Deal

Deal Marketing on the Internet Using Software to Find Investors and Sell Your Deal

Presented by: Zack Miller (OurCrowd) & Steven Dresner (Dealflow.com)

About your webinar participants: Zack Miller, OurCrowd Zack Miller has been growing investment businesses for the past decade. He's held senior leadership positions and consulted to some of the top next-generation finance sites including Seeking Alpha, Lending Club, LearnVest, Wall Street Survivor, Covestor, and SigFig. Zack began his career in finance as an equities analyst at a multinational hedge fund. He's also the author of Tradestream your Way to Profits: Building a Killer Portfolio in the Age of Social Media (WIley, 2010) and runs the popular investing website Tradestreaming.com. Zack received his MBA from Northwestern's Kellogg School of Management and his BA in Economics from Harvard. Steven Dresner Steven is founder and chief executive officer of Dealflow Analytics and is responsible for corporate strategy relating to Dealflow.com. Prior to founding Dealflow Analytics, Steven was founder and chief executive officer of DealFlow Media (acquired by TheStreet Inc. NASDAQ: TST). Steven was also an investment banker with Ladenburg Thalmann & Co. and was founder and chief executive officer of VCOM Corporation (acquired by Utility.com). Steven has also been an active third-party marketer for hedge funds. Steven has a BS in psychology from George Washington University and both an MBA in finance and a graduate degree in computer communications and networks from the Lubin School of Business at Pace University. Steven is co-author and editor of six books including "PIPEs: A Guide to Private Investments in Public Equity" and "The Issuer's Guide to PIPEs" (Bloomberg Press), and is a contributor to "Reverse Mergers: Taking A Company Public Without An IPO" (Bloomberg Press). He just completed his latest collaborative book, "Crowdfunding: The Definitive Guide to Raising Capital on the Internet," published by John Wiley & Sons in April 2014.

2  

About OurCrowd, the global leader in equity crowdfunding. OurCrowd is the leading venture capital-equity crowdfunding platform for accredited investors to find and invest in professionally-vetted private, high-growth technology companies.

3  

Our team sources and diligences hundreds of early stage companies monthly, selecting and investing in a handful. Once we’ve invested, we open the round to our member base around the world to join on the same terms. Since launching in 2012, nearly 4000 accredited investors from 50+ countries have joined our platform to get access to top deals and have collectively invested over $43M into 37 companies. These angels have, with a minimum investment of $10,000, been able to co-invest with major institutional investors like General Catalyst, Accel Partner, Khosla, Canaan Partners, Microsoft, Horizons Ventures, and others.

4  

Jon  Medved  Co-­‐Founder  &  CEO  §  Washington  Post:  "one  of  Israel’s  leading  high  tech  venture  capitalists”  

§  12  exits  >$100M  §  Co-­‐founder,  CEO  of  VRNG  §  Founder,  Israel  Seed  Partners,  $260M  AOM  

Elan  Zivotofsky  GP  Investments  §  Prelude  Israel  §  Tech  Banking  @  Lehman  §  Israeli  tech  analyst  @  Goldman  

Pini  Lozowick  General  Partner  §  GP  @  Alta  Berkeley  §  Dir.  MarkeYng  @  Broadcom  §  Chairman  of  Provigent  §  Founder  and  GM  of  Verisense  §  5  exits;  total  value  $3B  

Access  to  best  opportuniYes  

With  top-­‐Yer  co-­‐investors  &  angels  

Team  with  deep  experience  invesYng  in  and  growing  technology  companies  

OurCrowd’s model: why global angels are using us to invest in startups

What  is  the  future  of  deal  marke=ng?  

5  

Answer:  SoCware  

6  

A few things to keep in mind before we get started…

 The  No=on  of  Efficient  Markets…  Deals  are  similar  to  other  products  on  the  Internet  and  successful  deal  markeYng  will  require  accurate  product  informaYon,  lots  of  inventory,  and  easy  access  to  data.      The  Growth  in  Online  Deal  Marke=ng…  StaYsYcs  indicate  that  deal  markeYng  on  the  Internet  is  poised  for  tremendous  growth.  The  rise  of  Internet-­‐based  deal  markeYng  will  be  accelerated  by  the  growth  in  deal  portals  and  the  repeal  of  the  ban  on  general  solicitaYon.          This  is  bigger  than  crowdfunding…  We  aren’t  talking  solely  about  startup  deals  or  venture  deals.    What’s  happening  will  be  a  full-­‐on  migraYon  of  deal  markeYng  onto  the  Internet  that  includes  deals  in  all  sectors  and  of  all  types  and  stages.            

7  

Here’s a basic fact: Efficient markets rely on information  Due  to  regulatory  changes  and  the  rise  of  the  social  web,  the  business  of  raising  capital  is  rapidly  changing.  Access  to  accurate  informaYon  and  inventory  will  be  the  key  to  successful  deal  markeYng.        Stock  Brokerage:  Ver  1.0  -­‐  Asymmetric  informaYon,  phone-­‐based  selling  

     Ver  2.0  -­‐  More  informaYon,  do-­‐it-­‐yourself  research,  Internet-­‐based  selling    

 Think…            Capital  Raising:  Ver  1.0  -­‐  Asymmetric  informaYon,  phone-­‐based  selling  

     Ver  2.0  -­‐  More  informaYon,  deal  portals/agents/syndicates  selling  on  the  Internet    

 Think…      

8  

And another fact: Efficient markets of all kinds use the Internet for distribution of products

From  banking  and  stocks  to  travel,  music,  retail,  and  virtually  every  industry,  efficient  markets  coalesce  around  informaYon  and  move  onto  the  Internet.      

                     TradiYonal  Radio  =  Minimal  intelligence  about  users    TradiYonal  Travel  =  Fragmented  info,  expensive    Pandora  =  Lots  of  intelligence  about  users        Expedia  =  Aggregated  info,  inexpensive      

Deals  should  be  viewed  like  other  “products,”  and  that’s  why  successful  deal  marke=ng  will  require  accurate  informa=on  and  distribu=on  on  the  Internet!  (Think  about  it.)    

9  

Online deal marketing is poised for growth

Many  deal  portals  are  strategy-­‐specific…    

 AcYve    Global  “Accredited”  Deal  Portals    =    225  as  of    Jan  2014  (Crowdsourcing.org)    

 AngelList  (seed  stage  investments)  -  12,000+  accredited  investors  (TechCrunch)  -  4,700  companies  currently  raising  capital  (Jan  2014)  

   Axial.net  (private  equity  investments)  

-  15,000  members  (Jan  2014)  -  4,125+  acYve  deals  (Jan  2014)  

 Intralinks  (M&A)  -  Out  of  2,400  M&A  respondents  to  Intralinks  survey:  Over  55%  of  dealmakers  currently  use  an  online  deal  

network  to  support  deal  sourcing.  Of  them,  over  85%  of  sell-­‐side  M&A  professionals  have  marketed  at  least  one  deal  online  in  the  last  12  months.  Among  users  of  deal  sourcing  plalorms,  over  50%  of  buy-­‐side  and  over  40%  of  sell-­‐side  professionals  have  closed  a  deal  that  was  sourced  on  an  online  network.    70%  of  dealmakers  report  that  online  communiYes  of  M&A  professionals  are  making  deal-­‐sourcing  more  efficient.  

   AcYve  Global  Crowdfunding  Portals    =    945  (Crowdsourcing.org)  -  Growing  fast:  330  portals  added  since  November  2012  -  Big  push  in  the  U.S.  for  equity-­‐based  crowdfunding,  presently  in  SEC  comment  period  

           …which  is  why  I  an7cipate  portals  will  be  either  regional  or  sector-­‐specific  

10  

Don’t take my word for it… Take the SEC’s word for it! (The SEC forecasts 20% growth in private placements)

All  quotes  from  SEC  Rule  Proposal    dated  August  29,  2012    enCtled,  “EliminaCng  The  ProhibiCon  Against  General  SolicitaCon  and  General  AdverCsing  in  Rule  506  and  Rule  144A  Offerings.”  

“The  RegulaYon  D  market  is  large  compared  to  other  markets,  and  offerings  claiming  the  Rule  506  exempYon  are  by  far  the  dominant  type  of  offering  in  the  RegulaYon  D  market.  In  2011,  2010  and  2009,  issuers  raised  an  es=mated  $895  billion,  $902  billion  and  $581  billion,  respecYvely,  in  transacYons  claiming  the  Rule  506  exempYon.”  (p.  46)  

“…in  2011,  15,930  companies  made  18,174  new  Form  D  filings.  The  annual  number  of  new  Form  D  filings  rose  from  13,764  in  2009  to  18,174  in  2011,  an  average  increase  of  approximately  2,205  Form  D  filings  per  year...”  (p.  42)  

“We  esYmate  that  the  proposed  amendment  to  Rule  506  would  result  in  an  even  greater  annual  increase  in  the  number  of  Form  D  filings.  As  a  reference  point,  we  use  the  impact  of  a  past  rule  change  on  the  market  for  RegulaYon  D  offerings…this  was  followed  by  a  20%  increase  in  the  number  of  Form  D  filings…”  (p.  43)  

“…accredited  investors  who  previously  have  found  it  difficult  to  idenYfy  investment  opportuniYes  in  Rule  506  offerings  would  be  able  to  idenYfy  a  larger  and  more  diverse  pool  of  potenYal  investment  opportuniYes.”  (p.  49)  

“The  eliminaYon  of  the  prohibiYon  against  general  solicitaYon  would  likely  have  a  number  of  effects  on  issuers  and  investors.  When  using  general  solicitaYon,  issuers  would  be  able  to  reach  a  greater  number  of  potenYal  investors,  thus  increasing  their  access  to  capital.  The  proposed  amendment  to  Rule  506  would  likely  reduce  search  costs  associated  with  finding  accredited  investors  who  may  be  interested  in  a  par=cular  private  offering,  thus  enhancing  efficiency.  The  increase  in  the  number  of  potenYal  investors  could  result  in  greater  compeYYon  among  investors  interested  in  invesYng  in  an  issuer,  which  may  result  in  a  lower  cost  of  capital  for  issuers.”  (p.  47)  

“…we  es=mate  that  the  proposed  amendment  to  Rule  506  would  result  in  a  20%  increase  in  Form  D  filings…or  approximately  5,000  filings.”  (p.  43)  

11  

An overview of the marketplace

Issuers,  investment  professionals,  sponsors,  and  accredited  investors  are  all  embracing  the  Internet  as  a  source  for  deal-­‐related  informa=on.    Accredited  Investors1  

•  8.5  million  U.S.  adults  qualify  as  accredited  investors  •  ~  300,000  acYve  angel  investors  in  2012  funded  approx.  67,000  companies  

       Venture  Capital2  

•  480  acYve  venture  capital  firms  in  the  U.S.  as  of  2012  invesYng  on  average  $7.2  million  per  deal      •  These  firms  manage  $190  billion  in  commired  capital    Investment  Professionals3  

•  5.7  million  counted  in  NAICS  Code  52  –  Finance  &  Insurance  in  2011  U.S.  Census  •  ~  800,000  acYvely  employed  in  securiYes  industry    Private  Placements  in  Public  EquiYes4  

•  1,246  deals  completed  in  2012  •  4,193  market  parYcipants  (investors,  legal  counsel,  placement  agents)  acYve  in  2012    Crowdfunding5  

•  86  million  visitors  to  Kickstarter.com  in  2012,  up  from  8  million  in  2010  •  2.2  million  project  supporters  •  570,672  funded  mulYple  projects  

 Sources:    1)  Government  Accountability  Office,  UNH  Center  for  Venture  Research        2)  CB  Insights,  TechCrunch,  NVCA      3)  Economagic/U.S.  Census,  SIFMA    4)  PrivateRaise        5)  Mashable,  Kickstarter.com            

12  

Here are some of the companies solving problems in this relatively nascent area of deal tracking and analytics  

•  Crunchbase  •  Marermark  •  Dashboard  •  Tracxn  •  RelaYonship  Science  •  And,  Dealflow.com  (shameless  plug  to  follow)  

13  

And some of the firms receiving investment in the area of online deal marketing

14  

Company   Total  Funding  Amount   Investor(s)   Most  Recent  

Funding  Date   Business  Descrip=on  

LendingClub   $388,300,000    

Norwest  Venture  Partners,  Morgenthaler  Ventures,  Canaan  Partners,  FoundaYon  Capital,  Undisclosed  Angel  Investors,  AcYve  Starts,  Union  Square  Ventures,  Thomvest  Ventures,  Kleiner  Perkins  Caufield  &  Byers,  Bay  Partners,  Google  Capital,  Digital  Sky  Technologies,  Coatue  Management,  Undisclosed  Investors,  T.  Rowe  Price,  BlackRock,  Wellington  Management  and  Sands  Capital  

4/17/2014   Peer-­‐to-­‐peer  lending  

Prosper.com     $119,900,000    

Accel  Partners,  Benchmark  Capital,  Meritech  Capital  Partners,  Fidelity  Ventures,  Omidyar  Network,  DAG  Ventures,  QED  Investors,  VoliYon  Capital,  TomorrowVentures,  CompuCredit  Holdings  CorporaYon,  Draper  Fisher  Jurvetson,  Crosslink  Capital,  Sequoia  Capital  and  BlackRock  

9/24/2013   Peer-­‐to-­‐peer  lending  

Funding  Circle   $58,200,000     Index  Ventures,  Union  Square  Ventures,  Accel  Partners  and  Ribbit  Capital   10/23/2013  Peer-­‐to-­‐peer  lending  in  UK  

Zopa   $42,900,000    Arrowgrass  Capital  Partners,  Augmentum  Capital,  Benchmark  Capital,  Bessemer  Venture  Partners,  Tim  Draper  

1/30/2014   Peer-­‐to-­‐peer  lending  in  UK  

OurCrowd   $30,500,000   Individual  investors   4/28/2014   Equity  accredited  /  crowdfunding  plalorm  

And some of the firms receiving investment in the area of online deal marketing

15  

Company   Total  Funding  Amount   Investor(s)   Most  Recent  

Funding  Date   Business  Descrip=on  

Pret  d'Union   $25,700,000     Schibsted,  Credit  Mutuel  Arkea,  Kima  Ventures,  Weber  Investments,  Ag2r  La  Mondiale   11/7/2013   Peer-­‐to-­‐peer  lending  in  Europe  

Crowdrise   $24,730,000    

Union  Square  Ventures,  Spark  Capital,  Index  Ventures,  RatPac,  CAA  Ventures,  United  Talent  Agency,  Bezos  ExpediYons,  Lightbank  LLC,  Individual  investors  and  undisclosed  venture  investors  

12/31/2013  Crowdfunding  for  charity  

AngelList   $24,000,000    

Kleiner  Perkins  Caufield  &  Byers,  Google  Ventures,  Draper  Fisher  Jurvetson,  Atlas  Venture,  Marc  Andreessen,  Mitch  Kapor,  iNovia  Capital,  Ev  Williams,  SV  Angel,  Max  Levchin,  Paige  Craig,  Floodgate,  The  Kauffman  FoundaYon,  InnovaYon  Endeavors,  Version  One  Ventures,  Rothenberg  Ventures,  Gil  Penchina  and  Promus  Ventures  

9/22/2013   Equity  accredited/crowdfunding  plalorm  

CircleUp   $23,000,000    Google  Ventures,  Union  Square  Ventures,  Canaan  Partners,  Maveron,  David  Topper,  TriplePoint  Capital  and  Rose  Park  Advisors  

3/26/2014  

Equity  accredited/crowdfunding  plalorm  focused  on  consumer  products  

Realty  Mogul   $9,000,000     Canaan  Partners   3/27/2014  Equity  accredited/crowdfunding  plalorm  focused  on  real  estate  

Axial     $8,500,000    Cove  Point  Holdings,  Fabrice  Grinda,  First  Round  Capital,  Lerer  Ventures,  Mark  Gerson,  Redpoint  Ventures  and  Windcrest  Partners  

5/18/2012   Membership  community  of  private  companies  and  M&A  

And some of the firms receiving investment in the area of online deal marketing

16  

Company   Total  Funding  Amount   Investor(s)   Most  Recent  

Funding  Date   Business  Descrip=on  

FundersClub   $6,500,000    

Spark  Capital,  Intel  Capital,  Felicis  Ventures,  Y  Combinator,  First  Round  Capital,  General  Catalyst  Partners,  SV  Angel,  Andreessen  Horowitz,  Plug  and  Play  Ventures,  Pejman  Nozad,  DG  IncubaYon,  Chris  Dixon,  Start  Fund,  Draper  Associates,  Dan  Rose,  Jack  Abraham,  Netprice.com,  Aaron  Levie,  GVA  Capital,  Farzad  Nazem  and  Investmon  Sarl  

10/1/2012   Online  venture  capital    

EquityNet   $5,000,000     Proton  Enterprises  and  undisclosed  investors   4/8/2014   Equity  accredited/crowdfunding  plalorm    

Seedrs   $3,510,000     DFJ  Esprit,  Undisclosed  Angel  Investors  and  AFT  Holdings   2/3/2014   Equity  crowdfunding  

plalorm  in  the  UK  

SeedInvest   $3,000,000    

Archer  Gray,  Avenue  A  Ventures,  Great  Oaks  Venture  Capital,  JumpStart  NJ  Angel  Network,  Krillion  Ventures,  Scout  Ventures  and  undisclosed  angel  investors  

4/14/2014   Equity  accredited/crowdfunding  plalorm  

Here’s how you should view the future of deals (and deal data)  

 There  are  two  primary  inputs  in  the  world  of  deal  tracking…    1)  Deals  (that  is,  companies  running  deals)  and  2)  investors  in  deals      There  are  three  types  of  en==es  involved  in  deals  (what  we  call  the  “three  I’s”)…  1)  Issuers  2)  Investors  and  3)  Intermediaries      There’s  “hard  data”  and  there’s  “soC  data”…  Hard  data  =  sourced  informaYon.    So}  data  =  anecdotal  or  contextual  informaYon.  This  informaYon  forms  the  basis  of  deal  tracking  in  the  world  of  deal  markeYng  on  the  Internet.        

If  you  give  investors  access  to  this  data  then  you  can  begin  to  understand  their  investment  preferences.  (It’s  not  complicated.  Again,  think  about  it.)  

17  

The way we’re solving problems @ Dealflow.com  

As  deal  markeCng  increasingly  involves  the  use  of  soRware  to  assist  –  and  in  many  cases  replace  –  agents,  finders,  and  investment  bankers,  we’re  focused  on  problems  related  to  

the  DISTRIBUTION  of  deals.  (DistribuCon  is  everyone’s  “problem.”)                    

       We’re  using  publicly  available  data  and  proprietary  surveys  to  build  detailed  investor  profiles  and  deal  profiles  with  a  view  towards  algorithmic  matchmaking.      

   Companies  like  Nellix,  Amazon,  and  Pandora  refer  to  this  as  a  “recommendaYon  engine.”  In  the  process  of  running  our  business,  we’re  building  a  large  database  of  accredited  individual  investors  and  insYtuYonal  investors,  complete  with  detailed  investment  preferences.    

18  

Remember… This isn’t (only) about crowdfunding.

19  

20  

QuesYons  relaYng  to  this  presentaYon  should  be  directed  to:      Zack  Miller  OurCrowd.com  [email protected]  Telephone  +972  (0)  2  636  9300    or    Steven  Dresner  Dealflow.com  [email protected]  Telephone  +1  (516)  876  8006  

21  

Thanks  for  joining  us  today    

This  webinar  is  an      

produc=on.  Find  this  and  more  content  at  blog.ourcrowd.com