Thought Leader in Financial Technology: DealMaker CEO Rebecca Kacaba (Part 3)

Sramana Mitra: How many companies are raising funds on your platform right now?

Rebecca Kacaba: Between 30 and 40 new companies every month and over $1.6 billion in capital transacted through the platform.

Sramana Mitra: Are there any stage and sector trends?

Rebecca Kacaba: Usually, we’ll see a good amount of technology, real estate, and anything that’s going the Wall Street trend. Food tech is an interesting emerging space.

Sramana Mitra: What about stage? Let’s specifically talk about technology. When you’re bringing a new technology to market, the traditional VC has become fragmented. Where do you see your deals? Are they in pre-seed, seed, or Series A?

Rebecca Kacaba: Any stage. Our technology will work for any deal where you’re bringing in over 10 investors. We’ll see companies do smaller CFs and then maybe a second CF. Then maybe a larger transaction. Sometimes we have public companies.

Sramana Mitra: Does that mean that you are also doing concept financing?

Rebecca Kacaba: What do you mean by that?

Sramana Mitra: When somebody doesn’t have anything. They just have a concept.

Rebecca Kacaba: Sure, yes.

Sramana Mitra: The reason I ask is, concept financing is the hardest kind of financing. Most VCs these days don’t do concept financing. Concept financing and pre-seed financing are the terribly underserved areas of technology investing. It would frighten me if unsavvy investors start doing concept financing because that’s a surefire way of losing money. You probably don’t remember the dot com crash of 1999. This is what happened. Rank-and-file investors were investing money in concepts and losing their shirts.

Rebecca Kacaba: Interesting. How were they getting in on that because JOBS Act was in 2015, right?

Sramana Mitra: Society suddenly discovered this thing called the internet. The Netscape IPO in 1994 created this mania about the internet and then in the subsequent years, there was this enormous interest. Every Tom, Dick, and Harry was starting a company. All friends of Tom, Dick, and Harry were investing in these random companies. Many were not viable companies.

Rebecca Kacaba: Unaccredited investors were allowed to invest under the JOBS Act which came out in 2015. Prior to that to get to a pre-IPO, you had to be accredited.

Sramana Mitra: Not at all. Friends and family have always invested in startups. Friends and family are not necessarily accredited investors necessarily. Part of the pushback we see in equity crowdfunding, as long as they’re accredited investors and there is some education in investing, they are in a better place. The earlier you go in fundraising and the less smart the money is, the more it is in the danger zone.

Rebecca Kacaba: So you don’t believe in equity crowdfunding at all?

Sramana Mitra: I do believe in equity crowdfunding. Are you familiar with Modernizing Medicine? They did a wonderful customer financing round who were all doctors. Doctors tend to have money. They raised money from 75 doctors.

Over and over again, they have done equity crowdfunding rounds. That’s a great equity crowdfunding model. These are people who understand the business. They understand why they’re investing in the business.

Rebecca Kacaba: So only doctors who make above accredited investors status should get to invest?

Sramana Mitra: No. I’m saying that one, you should have enough money to be able to lose that money.

This segment is part 3 in the series : Thought Leader in Financial Technology: DealMaker CEO Rebecca Kacaba
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