Building a Capital Marketplace for Mid-Market Businesses: Axial CEO Peter Lehrman (Part 4)

Sramana Mitra: What kind of traction did you see? With that industrial manufacturing concentration, what kind of traction did you see in the beginning?

Peter Lehrman: Very quickly, we had customers willing to pay us a couple of hundred dollars a month on the demand side. The private equity community was ready to pay – not particularly a high price – for a service offering that would help them find investment opportunities more easily and more quickly. We saw that traction in the first couple of months. On the broker side of the platform, in the first month, we probably had 20 or 30 transactions that brokers had uploaded to the platform and began to make available.

We weren’t the first business to begin developing an online platform for brokers to sell companies. We think we’re best-suited for middle-market businesses. There were a lot of listing sites that were predecessors to Axial. Those listing sites tend to work very well for local businesses like bars, gas stations, and restaurants. They don’t work nearly as well for bigger businesses with $20 million in revenue. The reason they didn’t work well was because they didn’t give privacy tools to the broker. In many cases, the entrepreneurs want to run a much more private and controlled process.

One of the ways that we differentiated ourselves right away with the broker community was when a broker was serving a CEO and the CEO didn’t want to use a public listing site, they always chose Axial. Axial gave the broker control over who was able to find the opportunity. The listing site made it 100% public.

Sramana Mitra: The brokers were also paying a couple of hundred dollars a month? Was that the fee structure for you?

Peter Lehrman: In the first version when we first went to market, everything on the broker side was 100% free.

Sramana Mitra: The private equity firms were paying and the broker side was free. Was there a transaction charge?

Peter Lehrman: No, we don’t charge transaction fees. We still don’t charge transaction fees.

Sramana Mitra: It’s a subscription fee business model.

Peter Lehrman: Yes, it’s 100% subscription based. We don’t charge any deal fees.

Sramana Mitra: Let’s go to the end of 2009. Where were you? What kind of milestones had you achieved at that point? What were the metrics of the business?

Peter Lehrman: We probably had about 500 members at the end of 2009, probably 80% were brokers and 20% were investors. About 20 to 30 transactions were probably being attempted every month. At the end of 2009, we probably had about 10,000 to 15,000 in MRR.

Sramana Mitra: How many transactions had happened at that point?

Peter Lehrman: We had no ability to track transactions similar to LinkedIn not tracking who’s been hired through LinkedIn. Particularly at that time, we had no workflow tools and no status update tools. We only had anecdotal information about the quality of the connections that were being made via Axial. We weren’t tracking any closed transactions at that time.

This segment is part 4 in the series : Building a Capital Marketplace for Mid-Market Businesses: Axial CEO Peter Lehrman
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