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Dealflow – Keeping the FIN in FinTech

Dealflow – Keeping the FIN in FinTech

Dara Albright



I recently read a thought-provoking article by Dealflow CEO, Steven Dresner, titled, “If you want crowdfunding to succeed, start by de-coupling ‘finance’ from ‘fin-tech.’” What I found most interesting was that the financial data veteran described technology as the “enabler” not the “end game.”

Was Dresner intimating that technology has now become the veins - as opposed to the heart - of a FinTech business?

Based on this thesis, I wonder whether Wall Street is not only mis-valuing FinTech businesses, but today’s technology companies in general.

When I started my financial career  23 years ago, technology was seen as a commodity – just like gold, oil and my all-time favorite, frozen concentrated orange juice.

Technology was not only expensive to develop, but it was costly to maintain. Even the most basic tools needed for a simple website were available only under a commercial license.

Because both hardware and software were so expensive, deep-pocketed enterprise buyers were technology’s primary consumers. Accordingly, launching an online business in the Internet’s olden days required significant capital.

Luckily for Internet pioneers, no shortage existed of cash chasing tech startups in the 1990s.

You probably don’t even remember Boo.com, a company CNET once described as one of the greatest dot-com busts in history. This particular dot-bomb squandered $188 million of investors’ capital, and within months was placed into receivership. Its core assets, software and technology, were purchased during the peak of the Internet bubble for $70 million, and were ultimately liquidated for just $372,500.

Ouch!

Indeed the world has dramatically changed in the last 15 years. Open source and cloud computing fundamentally transformed how technology is developed, utilized and priced.

Today, anyone can embrace his inner entrepreneur and be up and running with a WordPress site for about the price of two venti Starbucks lattes.

The cheaper and more readily available technologies become, the less value they retain. In a relatively short time, technology has evolved from a commodity to a part of life – like air.  

Some financial professionals would argue that data has become the real commodity. NY-based venture capitalist Fred Wilson believes that “the new oil is going to be found in various places in the tech stack where software and data come together to produce a service that has high operating leverage at scale and is defensible by the network effects that the data provides.”

I have a much less complex perspective.

I believe that there are two distinct categories of technology companies. There are those very select few that invent technology and then there are the vast majority of businesses that exploit it. Most FinTech businesses fall into the latter category. Much like the lesson that Boo.com learned 15 years ago, a company’s technology – no matter how advanced they claim it is - is worthless without application.

Data creation is perhaps technology’s most valuable function. However, data that can readily be replicated holds little to no merit. In the same way that anyone can build a website, any two-bit coder can aggregate data.

More pertinent than technology knowhow, today’s FinTech winners require extensive financial acumen. Their value lies not in piece of software, but rather in the CEO’s vision, his execution, his grasp of how the financial services industry is evolving, and in the company’s ability to produce irreplicable data. 

I’m proud to highlight Dealflow as this week’s feature platform – a FinTech company possessing all of these essential attributes. Dealflow is a financial data licensing company with a rich history in building deal databases and FinTech products.

Dealflow’s roots date back to the early 2000s when its predecessor company, Dealflow Media, emerged as the kingpin in the PIPEs intelligence space. In 2008, DealFlow Media acquired a financial deal-tracking business called PrivateRaise. As a result of this acquisition, Dealflow’s business became focused on leveraging the power of data. Even as the financial crisis worsened in 2008 and 2009, Wall Street continued to pay for Dealflow’s financial data. According to Dresner, his realization that the future would depend on data was a defining moment in the company’s history. 

When the general solicitation ban was finally lifted as a result of the passage of the JOBS Act, Dealflow began experimenting with the collection of “actively marketed” deal data – ie: deals that were being pitched to investors (as opposed to deals that had already been funded and closed). Seeing the opportunity to capitalize on this novel concept with a first mover advantage, in the spring of 2013, Dealflow Media sold most of its operating assets to TheStreet, Inc. (Nasdaq: TST) and invested the money in its new venture: Dealflow.com.

Although I’ve had this company on my radar for quite some time, it was only during the past year when I was able to fully grasp the substantive nature of what the company had been quietly building. Dealflow is not simply aggregating deal data, it is amassing the largest and most unique databank of alternative-asset investors. And they are accomplishing this by focusing on the “fin” in “fin-tech” while strategically challenging the status quo.

PLATFORM HIGHLIGHTS:

URL: https://www.dealflow.com

ASSET CLASSES OFFERED: Debt Financing, Private Equity, Venture Capital, Late Venture, Middle Market

INVESTORS SERVED: High Net Worth (Accredited) Investors, Registered Investment Advisors & Broker/Dealers, Family Offices, Plans & Endowments, Institutional Investors & Funds

PLATFORM DIFFERENTIATOR: Companies are borrowing online, raising equity online, and increasingly pitching their transactions on deal portals, social networks, and through email. Institutional players are beginning to commit resources to online capital formation yet there’s no platform focused on later-stage companies raising capital. Dealflow has been building this platform.

ELEVATOR PITCH: In addition to its deal tracking system, Dealflow is developing a deal-matching engine that uses publicly available data and proprietary surveys to build detailed investor profiles and deal profiles with a view towards algorithmic matchmaking. Because of this unique feature, Dealflow has been likened to the “Netflix of Finance”. 

ISSUER CRITERIA:

Must be primary market securities (equity and debt).
No real estate projects.
No investment funds.
No startups (as defined as companies raising their first round of outside capital).
Presently, tracking private operating companies conducting private placements.
In 2016 company will be adding leveraged loans and PIPEs to the platform.

REGULATORY FRAMEWORK: Reg 506(b), Reg 506(c), Late stage equity and leveraged loans are the company’s initial focus

GROWTH OF THE BUSINESS

NUMBER OF EMPLOYEES: 16

FINANCING: $1.9M Common Equity (closed 1Q2015)

REVENUE MODEL: Data licensing

MANAGEMENT TEAM

Steven Dresner, CEO - Steven is founder and chief executive officer of Dealflow and is responsible for corporate strategy. Prior to founding Dealflow, 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 extensive operating experience and startup success in the areas of software development, financial database technologies, and digital media. He has also advised many companies and hedge funds on strategies to raise capital. 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 was a contributor to "Reverse Mergers: Taking A Company Public Without An IPO" (Bloomberg Press). In 2014, he completed his latest book, "Crowdfunding: The Definitive Guide to Raising Capital on the Internet" (John Wiley & Sons/Bloomberg Press). Steven is also a private airplane pilot and outdoor adventurer.

Michael Bertisch, President & General Counsel - Michael Bertisch has been advising Dealflow on both legal and strategic matters since October 2013 and joined as President and General Counsel in August 2014. With a nearly 20 year career as a transactional and private fund attorney, Michael brings significant experience on a broad range of legal and strategic matters. Most recently Michael was part of the senior management team of FNY Capital Management, a proprietary trading firm, serving as Special Advisor to the Board since 2011 and as General Counsel starting 2014. Prior to joining FNY, Michael served as General Counsel and Chief Compliance Officer for Quadrangle Group LLC, a multi-strategy manager of private funds including private equity and hedge funds focused on the technology and media industries, a distressed debt hedge fund and the family office of New York City Mayor Michael Bloomberg. Michael is a graduate of the Duke University School of Engineering and Columbia Law School.

Jordan Hadas, Head of Product/Technology - Jordan is responsible for product management and technical infrastructure at Dealflow.com. Jordan has a background in big data, enterprise architecture, and agile development. A technology leader for over 10 years, Jordan has demonstrated success building and managing software products from ideation through the sales and user-onboarding process. He was instrumental in the exit of two technology companies - BiTKOO, an identity and access management organization, where he served as the Director of Product, and Nova Point of Sale, where he served as the COO. He was also the former VP of Operations at Personally Cool Inc., an e-commerce company focused on consumer goods. Jordan is a graduate of Tulane University.

Scott Schulman, Non-executive Chairman, Strategic Advisor - Scott has spent his career leading complex information businesses. Most recently, as President of Rodale, he led a transformation of the health and wellness media company to drive global growth in digital sites, mobile tools and new product launches. Scott spent more than 13 years at Dow Jones & Company, where he led global business and financial data groups. As President of Financial Information Services and as President of the Corporate Markets Group, he built and grew leading financial and business information product areas, including Factiva, Watchlist and VentureSource. He also served as President of Dow Jones Consumer Electronic Publishing and publisher of WSJ.com, where he led a turnaround to profitability through the introduction of several new revenue streams and the expansion of the online subscription model for The Wall Street Journal. He earlier served as senior vice president of Global Sales and Marketing for The Wall Street Journal franchise and Chief Strategy Officer for Dow Jones. Earlier he was a partner at the global consultancy Booz Allen Hamilton, where he spent 11 years in strategy and operations consulting.

Gerald Laporte, Regulatory Advisor - Gerry provides business consulting services in the areas of capital formation and SEC reporting obligations of smaller public companies. As Chief of the Office of Small Business Policy at the U.S. Securities and Exchange Commission from 2002 to 2013, Mr. Laporte oversaw the agency’s programs in the areas of exempt securities offerings for operating companies and funds, investor disclosure rules for smaller pubic companies, and crowdfunding. He played a major role in SEC rulemakings in those years relating to Regulation D and Form D. From 1987 to 2002, Mr. Laporte practiced securities and corporate law with prominent Washington law firms, including most recently Hogan & Hartson LLP. Mr Laporte also worked at the SEC from 1982 to 1987 as Senior Special Counsel for Legislation and Investment Management in the Office of the General Counsel and as Counsel to SEC Commissioner Joseph A. Grundfest. He began his career in private practice with the law firm of Wilmer, Cutler & Pickering from 1977 to 1982. Earlier in the 1970's, he had worked as Legislative Assistant to a U.S. Congressman and served as Law Clerk to a U.S. District Judge in Washington. Mr. Laporte served as Chairman of the Corporation Finance and Securities Law Section of the District of Columbia Bar from 1997 to 1998. Mr. Laporte holds a law degree, awarded with honors, from the George Washington University Law School, where he was Managing Editor of the law review. He also holds an M.A. degree in Political Science from Georgetown University, and degrees from the University of Ottawa, Canada, and Sacred Heart Seminary College, Detroit.

Shaun McCarthy, Technical Advisor - Shaun is currently the Software Development Manager of the Amazon.com Advertising Data Science and Engineering team. He is the former Chief Technology Officer and member of the Executive Committee of CreditSights, a leader in worldwide independent bond research. He has overseen the production and development of multiple machine learning and quantitative finance models from conception to reality. Previously Shaun consulted for companies in a variety of industries including AMP, International Creative Management, Verizon, News Corp & Bank of New Zealand.

INDUSTRY PREDICTION:

“Expect the business of raising equity capital online to follow a similar growth trajectory as P2P lending.” – Steve Dresner

About the Author

Dara Albright is a recognized speaker, writer and influencer on topics relating to crowdfinance, market structure, next-generation IPOs, FinTech, and P2P investing.  Albright has held a distinguished 23 year career in IPO execution, investment banking, corporate communications, financial marketing as well as institutional and retail sales. She is most known for introducing rising asset classes and crowd-structured financial products to the Wall Street community through leading-edge articles, white papers, webinars and acclaimed conferences such as LendIt and FinFair.















































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