Building a Capital Marketplace for Mid-Market Businesses: Axial CEO Peter Lehrman (Part 5)

Sramana Mitra: You were providing the management tools on the transaction but you were also making those connections.

Peter Lehrman: Yes. At the core of Axial is a search engine that looks at the data related to the company that is raising capital or is for sale. It looks at all the data that is uploaded by either the entrepreneur or by the entrepreneur’s investment banker or business broker. Then it renders a filtered list of recommended private equity buyers, lenders, and corporate buyers. It creates a specialized curated list of recommendations based on all the data we have from different sources of capital. The entrepreneur who is deciding to raise capital or the investment banker who is acting on behalf of the entrepreneur can then select which of those people or organizations they want to reach out to and connect with. That entire portion of the process happens on Axial.

We built the tools to upload the data of the company. We built a search engine that recommends the most likely investors or buyers of the company that are on Axial. Then we built the messaging tools to connect with them. Once you connect with them, particularly back in 2009, you were almost immediately taking the transaction offline. It was 100% organized as a connections platform where you make the first contact through Axial, and then you did everything else through your existing work flow.

Sramana Mitra: It’s kind of a LinkedIn type of model except it’s a very specialized function that you’re enabling.

Peter Lehrman: Yes, we’re focused on enabling connections around financial transactions.

Sramana Mitra: What is the smallest-sized company that would go look for financing on your site?

Peter Lehrman: The largest businesses that have used Axial to raise capital actually have over a billion in revenue. Those are the outliers. The majority of the activity occurs between $5 million and $250 million in revenue.

Sramana Mitra: What about concentration in terms of industry segments? In the first year, you were concentrating on industrial manufacturing. What was the strategy in 2010? Were you still in industrial manufacturing? How was the vertical penetration progressing?

Peter Lehrman: We rolled out additional industry verticals in each of the subsequent years. This was something that I actually had a decent amount of experience with because we did something similar at GLG. GLG started with the healthcare and biomedical industry and then we branched out from there. At Axial, we started with the industrial manufacturing category and then consumer goods and services. The next category was tech, media, telecom, and the healthcare industry. The consumer goods and services vertical rolled out in 2010 and 2011. Then tech, media, telecom, and healthcare in 2011 and 2012.

Today, with the exception of the actual community banks and financial services category, there’s a lot of activity on Axial domestically across all of the major industry categories – aerospace and defense, transportation, software,  hardware, telecom. We were rolling out those broad large industry verticals starting in 2009 and rolling out about one to two verticals each year. We’re still working on all of them. They’re all large industries. There are many brokers and investment bankers, as well as lenders and acquirers, that are active in those markets who still haven’t heard of us. We’re still constantly deepening the liquidity of the marketplace in each of those major industry sectors.

This segment is part 5 in the series : Building a Capital Marketplace for Mid-Market Businesses: Axial CEO Peter Lehrman
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