Rebecca Kacaba is a co-founder & CEO of DealMaker.tech, a leader in the growing field of digital capital raise platforms. Dealmaker has powered nearly $2 billion of online capital raise for it’s clients.
Rebecca is winner of Lexpert’s Top 40 Under 40, named one of North America’s most innovative lawyers by the Financial Times, a finalist for 2022’s EY Entrepreneur of the Year and one of Canada’s Top 100 Most Powerful Women. After a decade of practicing securities law, she took an ambitious leap from her partnership at the world’s largest law firm and founded DealMaker to build a system that would combat the costly inefficiencies that plague the traditional capital raise process.
She is the force behind building DealMaker into Canada’s 3rd Fastest Growing Company as ranked by the Globe & Mail’s Report on Business. With her vision and drive, Rebecca has become a leader and trailblazer in the intersection of the capital markets and tech, who is committed to driving change and doing business the right way. In only 4 years, DealMaker has powered over $1.84 Billion USD in capital raised, more than double any leading US counterpart in less than half the operating history.
Rebecca currently serves as a Board Member for the Crowdfunding Professionals Association (CfPA) to help shape the future of this new and emerging segment of the capital markets.
John Newtson: All right. Hey everyone. So. My view is that we are kind of in a world where you can now raise up to, what, 75 million online with essentially an e-commerce checkout process. And a consequence of that is that online capital raise is merging with kind of e-commerce marketing and business practices. And that reality has kind of an enormous set of consequences for both companies looking to raise money and investors.
But one of those is that right now there’s kind of a race going on. To become what I think of as the Amazon of digital cap raises, and it’s one of the most exciting areas in like capital markets tech. And today I’m joined by Rebecca Casaba, the CEO and co-founder of Dealmaker Tech, who in a lot of ways, you guys are kind of the front runners in this sector.
You got it.
Well, thanks for being here.
Rebecca Kacaba: Thanks for having me.
John Newtson: Yeah. So I think like, just to kind of jump into this, what I really wanna do is basically talk about this as a, as kind of a sector on the industry first. Right? And so like, would you just give kind of, for people who aren’t as familiar with the space, right.
Would you give a quick kind of history of the development of kind of the, the, from the jobs act, I guess with, with, with cap raises from crowdfunding and Reg A to kinda where we are today in the development of the space.
Rebecca Kacaba: Yeah, for sure. So it was probably around 2015 when the Jobs Act came out and Congress and the Senate took a look at the US capital markets and they said, Okay.
Companies are staying private longer, and the average American needs to be able to have more access for wealth creation. And one of the beautiful things about this space is that it’s bipartisan supported, both the Democrats and Republicans love what we’re doing in Reggae and supported because it contributes to democratization of the capital markets and it contributes to wealth creation.
So they said companies are staying private longer. IPOs, it’s, it’s not as easy to make money in the public market ecosystem. And we’re gonna expand the securities law exemptions that allow everyday Americans to invest in private companies by making sure that they’re protected, they have access to information, they have caps on the amount of money they can invest based on their net worth.
And so, Over the last 10 years, the ecosystem has gone through different ebbs and flows where online crowdfunding became popular, and then it ebbed away a bunch of the stories that did used it weren’t that good. They iPod people didn’t make money, so the system quieted down a bit. And then when we reentered a couple of years ago, the system really started picking up steam because you had these different kinds of companies accessing it and exactly what you said happened the.
Innovation of digital marketing and the use of data in these digital marketing techniques combined with the fact that the younger generations are consuming over 74% of their news online versus in the traditional methods versus, as well as the impact of platforms like Robinhood and things that are making.
Online trading happen at a much rapid rate, right? You’ve got people trading crypto, you’ve got payable, trading NFTs. And then people came back and said, you know what? Like I do wanna access some privates. They are, there is risk there like with any set of startups, but I can stand to make a lot of money.
Over 10 x returns in this space if I play my cards right and build my portfolio. Right. And so that’s kind of the, the phase where we’re at now where we’re seeing a lot of the sectors of the capital markets having very little activity. Right. IPOs being down over 90%. VC sector being very quiet in the investments that they’re making, but equity crowdfunding, staying strong because there’s a huge appetite for these privates and the exposure to these deals that people really haven’t had before.
John Newtson: Yeah, I think, I think it’s very easy for people to forget or not realize that the the generational increase in sophistication in investing that has happened over the last 20 years in that we’ve seen this from the subscription publishing world where you had there was a period of time I was use as an example where if you traded options as, and you wanted to sell a subscription product around that it was impossible to sell if you actually told people it was an options training thing.
And people, when people did all these crazy marketing things where they would hide it and then then, People would find out and they’d refund like crazy, and it was a terrible thing. But what we saw happen over the last 10, 15 years 10 years, is the traders and the, the average retail investor and trader got very sophisticated.
They loved options. They started in, in having an options mechanism became something that increased sales on on different subscriptions and, and that points to this increase in sophistication. And when you look at the data on millennials and even Gen Z, both groups. Trade more often for their age group compared to older generations.
And higher volumes, like they’re starting earlier, they’re doing more. And I think that like the element or the aspect of privates like it’s something that’s very exciting to them. I feel like we find younger investors more interested in it than older. It almost seems like, do you guys find that?
Rebecca Kacaba: Yeah, definitely. And the risk appetite for those under 35 is very different too, right? Like they’re willing to take a higher risk portfolio because they’re gonna see the gains over their lifetime. So there’s definitely a chunk of the investor market that in the older age demographic. But there’s this new hungry, young demographic, which are very used to trading online, very used to taking some risk.
Very used to consuming their news online and getting educated about the financial sector.
John Newtson: And what, what I think is so exciting about that is that we know that the first generation of millennials hit 40 this last, like two years ago, a year ago. This largest generation in history that hasn’t moved fully into their prime investing years because that really life cycle starts in your forties.
And so there’s this wave of more, both technologically sophisticated, more investing, sophisticated this whole generation is much bigger and more sophisticated. That is. Not yet there yet. And as they come in to those prime saving years, I think that we’re gonna see kind of a, a, you know, an increase in the bull market in, in retail investors.
And so for me that’s a very exciting, just basic demographic reality that online capital raise in particular seems to be perfectly positioned to benefit from.
Rebecca Kacaba: Yeah, and I think Covid amplified it, right? So if you look at the size of the cohort that joined between 2019 and 2021, the percent of of investors that joined the market during that period was as large as the number of people who joined in the eight years prior.
So you had a huge increase in that younger cohort as people were at home and found new hobbies, and those hobbies don’t necessarily go away. Right. Once you know what EBITDA means or what privates are, you can continue to engage in that behavior.
John Newtson: Yeah, you, you basically like, there’s no point in, there’s no place in life where you become less sophisticated over time.
Rebecca Kacaba: Right, exactly.
John Newtson: Right. So kind of like, so what I wanna do today is kinda talk through there, there’s three ways to look at this sector. In my mind there’s the, the issuer’s perspective, the investor’s perspective, and then there’s like the platform and investors, investors in the industry itself’s perspective.
And so what I’d like to do is kind of run through this and then as we get that more fleshed out, then I wanna kind of talk about where, where you see dealmaker kind of fitting within that broader ecosystem. And so kind of to start, On the, let’s go with the issuers first. Right. And I think there’s two primary contexts to talk about it from an issuer’s perspective.
There is the, I would almost say traditional issuer. There are the people who are already participating in the existing capital formation ecosystems. The venture capital world, they’re, they’re going public. There, there are, they are public. And so you have all the market participants on that side. And then you also have, I would say the, the non-traditional.
Issuers people who maybe are not participating in that. I know we have some great stories that I wanna get to from groups like the Green Bay Packers but also I think if there’s this thing called Ghost Unicorns is what I call ’em which we’ll get to. But there’s all these digital entrepreneurs who have never raised capital and built great businesses who are perfectly kind of suited to the capital rates process through an e-commerce model.
And so, Let’s start with the existing world. Cause I think that’s where everyone can understand it the most. How would you talk about, the CF and the reg a capital raise environment within the context of kind of the preexisting capital formation ecosystems that are out there?
Rebecca Kacaba: So we get a huge number of clients from that category, right? Folks who are used to raising capital for their businesses and they understand the Reg CF and the Reg A categories, and the way it can complement what they’re doing in terms of the traditional pillars of the capital market. So I really envision a world five years from now where every entrepreneur knows that if they wanna capitalize their business, they have three, not two options, right?
They can go the VC route, they can go the Wall Street banker route. They can also raise from the community, and that community can give the company. A variety of benefits that many of the sophisticated capital markets players are well aware of. So that community, because it’s a large number of people can bring contracts or relationships to the business.
We’ve had lots of clients land major CL contracts for their business through the community just by asking. And a huge component of that comes down to com. Communicating with the community that you build so that you can tap them as a capital resource again, but you can also benefit from the relationships they have.
The other way to think about it is folks who know that having a large number of supporters for the business will just inherently benefit the business. So if you’re building an online portal, Or a consumer facing brand. The more people that are aware of the business and can transmit word of mouth benefit or can become champions for that business, the better that business is going to do.
So there are benefits like that that folks who are participating in the existing capital raising ecosystem become aware of, and so they can select this method of financing when they think it’s appropriate.
John Newtson: So I think that that piece of community seems kind of core obviously for a lot of reasons that if you have an existing audience in existing community, that that then represents not just a product distribution channel, but a capital raise distribution channel.
And I know I worked with a company they were a financial media group. And so they had a financial. Audience basically, and they did a regular Reg D at the time and they just thought, what the heck this was quite a while back. So, but they, they, they just emailed their investor base and I think on their series B, just on a Reg D they raised like $10 million.
Because they had such a robust community who happened to be investors. And so that kind of promise seems to be kind of at the heart of this, this world of cap raises online with, with, with CFS and everything else in, in Reg A is because of how much money can be raised now I know, what is it, like 5 million in CF and up to 75 on a Reg A plus.
Rebecca Kacaba: Exactly. And they’re looking at increasing that to $150m because Congress undertook to review every two years the caps on the exemption limits, and if they’re appropriate to increase them. Or decrease them potentially as well. But I think what we’re seeing is the space has largely played out quite well.
You know, you see fraud in every different sector of the capital markets. This sector has stayed extremely clean and so they continue to increase the exemption limits. ‘Cause when we get to talking about some of the bigger brands using the exemptions, $75 million is really not that much, like $150 or $2 million.
Now we’re talking about a more meaningful amount of capital.
John Newtson: Right, right. And so there are, so like, I would just say that it seems that what there’s kind of the pre-revenue, like the angel kind of side of the, of the business, like people who are, who are just trying to get early capital to get their business going.
But then there are people who are, who are businesses who are a little bit more farther down the road who, who almost, I think, are starting to see this as a path to IPO (Initial Public Offering) where they can build a broader investor base leading into an I P O. Right?
Rebecca Kacaba: Absolutely. We’ve done this. For companies con concurrent with their IPO.
So rather than doing a bank round, they do a community raise while they’re going public. And we’ve done it for existing public companies. We’ve actually seen in some of the public companies, not that many have ventured to try it yet because a lot of them don’t know about it. But because you’re spending on digital marketing, Well, it’s like a form of intensive IR.
We’ve actually seen stock prices jump while the digital campaigns are going on. The key to doing it with a public company is offering a differentiated security so that the investors are getting a different benefit than what they would get if they traded on the public market. So a lot of them using a warrant or some kind of offering perk that, you know, they get a t-shirt or an owner’s club hat or something like that.
John Newtson: Nice. Nice. And so anybody can do a Reg A even if they’re public. And so yeah. Are you seeing that piece, or, or maybe I should back up of those kind of areas. The people who are getting really early stage capital people who are pre-IPO, people who are post-IPO.
Where do you think most of the interest is right now? Or do you see, do any of those stand out more than the others?
Rebecca Kacaba: That’s a great question. We launch 30 or 40 new deals a month, so we see across the board all different deal types. Some of our enterprise clients, you know, reg CF portals, they’re pushing a huge volume of the early stage numbers, but we definitely.
In our model, see a lot of activity on the higher end, larger raise size as well. Because those folks have the resources to invest in a really robust campaign and they understand and they have people internally who can use the data that’s generated from these campaigns in a really optimizing way so that they can not only raise more capital this time, but the next time and benefit as a business from that data.
John Newtson: Yeah, and I think that, again, is something that’s, I dunno if it’s under underappreciated or maybe something just that I didn’t think about before. But the, the fact is, is that like the amount of data you can get on your investors on a, on a reg a, like one of the problems with the public stock that doesn’t, investor relations marketing campaign or, or they do press releases, is the attribution problem, right?
Like, it’s very, very, very difficult to know what efforts you spent on that actually had an impact in building your investor base. Whereas with your platform in particular, and with this whole kind of space, you can actually track marketing and media spend directly back to the investors, which from an R O I perspective is a game changer in terms of, of an issuer from my perspective.
And I don’t know if people who aren’t involved in this really appreciate how powerful that is.
Rebecca Kacaba: it’s hugely powerful. You’re absolutely right. It’s hugely powerful to know who your story is appealing to, how it’s appealing, and whether those people are just, you know, touching on a landing page or actually converting and writing a check and how big those checks are.
That really tells you who your story is appealing to and allows you to tweak the story appropriately. Hugely beneficial for newsletters as well. Are people enjoying the content? Are the top, you know, people who are actually converting on it the same month to month on the stories that are published?
Or are you consistently drawing new people to the story and are most of the people who subscribe to the letter actually engaging with it? There’s a lot of different ways that you can use that data to make your marketing then more powerful.
John Newtson: Yeah, and I think that one of the things that from everything that I know about marketing and sales, like, The most obvious thing is that the person who bought or invested already is the most likely person to do it when you ask again, and for most pubcos you don’t know who your investors are, right?
You don’t have that transparency. And so in this process you do get that transparency, right? And, and being able to go back to existing investors with big news, like this is what you, like. Everyone in the VC world knows this is exactly how you would do it. When good things happen, you go back to your existing investors and you say, Hey, give us more money.
In the public world, it’s very difficult to do that with any type of control. And so this online model actually does that. And that really from a, from a just a cap raise standpoint that’s an exciting. Element like that is extraordinarily exciting. And, and I don’t think like people who are come from non-marketing environments really understand just how powerful that is.
Rebecca Kacaba: It really is. And that’s why the focus of our newer products are on creating that communication between the investor and the company. Whether it’s bad or good investors just wanna know, they wanna know what’s happening with the company and with their investment and if they can, how to help. When I say that, a lot of times people are shocked.
I was talking to the regulators yesterday and they were shocked when I said that. And that’s surprising to me because I see so much of the investor inquiries, whether those investors are a subscriber to a newsletter, right? They’re gonna be happier with the newsletter if the investments that they make are communicating.
And that’s why our technology is driving at creating that communication to push the industry forward.
John Newtson: Okay. And I wanna get to the investor side in a second here. But first let’s jump a little bit to kind of these non-traditional issuers. Cause I think this is such an area, this is such an exciting thing, right?
Because this is where the blue oceans are for me in this, in this market, right? And so I guess we can just use the Green Bay Packers as a great example of one of the categories. And, and you have you worked with the Green Bay Packers, I think they raised, what, $65 million?
Rebecca Kacaba: Yep.
John Newtson: And so like, just talk, talk about that story.
What were they doing? What was the goal there? Because you think about an N F L franchise, they have a latent audience. They have a very active, a very engaged audience. And so it’s really, it is exciting to me to see that, that a team like that decided to raise capital this way from their fan base.
Rebecca Kacaba: Yeah. And it’s almost, it’s, it’s, the reason they have such an engaged fan base is they’re the case study for it. Right? If you make people owners in the business, you’re gonna create 54% more engagement from them with what the business is doing. And so Green Bay has raised capital from the fans six times throughout history.
The last time we helped them in 2022, the last time they did it was about, you know, six or 10 years before that. So it’s not often that they do it, but they have the most engaged fan base in the N F L because they have a robust community of people that are diehard fans that are putting money in to build that stadium, that feel like they’re a part of the team and part of that story, and they will champion it, wherever they go, wherever they move across the us.
So on their recent raise, it was, you know, we haven’t run an internationally compliant platform. It was the first time they extended the ability to raise beyond the US borders and raised in Canada as well. And it’s a huge opportunity for any company, sports team movie, to really look at capital and distribution on a global basis and say, I have fans and champions in all different locations around the world that I can bring into my story and make more engaged.
I bought in the last Green Bay round, and I was excited. It was just last week when I got my tickets to Lampo Stadium for the annual shareholders meeting. Got a little package and update on what the team is doing, voting on some key matters for the business. It really draws you into this story like nothing else can.
John Newtson: And I think that that suggests some paths of probably I mean , the merging of digital cap raises with brand marketing. Is probably an area that will over time here explode just because I do think that that is one of the benefits and, and we see it with D2C customers, like, you know, people buy the product, they invest in a company, they’re motivated to do both.
But I do think that, again, like that’s such an exciting part of this is that, you know, if you’re an owner in a company, you have a completely different sense of relationship to it. And there’s still something about pubcos versus private raises that doesn’t give you the same feel, and I’m not sure what that is.
But there is something about a private, like owning this in a way that is not available publicly that, that like kind of, you know, Velvet rope, that adds a level of identification that that is, I think you know, considering how much brand advertising is wasted because they can’t track it either.
In so many, like how much money is sitting there waiting to come in could be a whole interesting area of business development.
Rebecca Kacaba: Yeah, I think it’s, you’re right. There’s something to it when it’s a private that you’re seeing the company get built, that people connect with, and we talk about that concept under impact investing because it’s a huge movement in the way millennials in the younger generation think about building a portfolio themselves.
Rather than someone giving them the guidance on how to build a portfolio. So they look at it and they say, okay, what kind of businesses am I gonna invest in? Whether it’s conscious or unconscious. And impact investing is hugely, hugely important with the number younger generations, and it’s very popular with those that do it.
And it’s seen as a better change agent for them than charity even. They wanna invest in businesses that they believe in, that they connect with, and that become a part of their self identity. So if you look at, you know, I invested in Netflix way back in the day because I saw the product, I used it. I said, this is amazing.
This is gonna change the world and a when and found the stock and I bought it. And I haven’t sold since because I really believe in that company and what they’re doing, and I’ve been a part of the journey of watching them build it. It’s the same thing when folks are impact investing. They really believe in the story.
They connect with it on a personal level, and they wanna see that business succeed and help it in any way that they can.
John Newtson: Which again is that kind of committed money is the most attractive money from a capital raise standpoint is, you know, there’s lots of kind of call fast money guys who, who will invest in a, in a deal.
And their goal is to be out in three years at the most. And you know, that’s great. If you need the money, you don’t have any other options. But that’s a very different type of dollar than somebody who’s like, I love this company. I’m in this company, I’m here for the long haul. And it is like, The chance to sell to retail investors that story and that journey and not just retail investors. I think that there’s a lot of investors , who can buy into that. But it does, it, it’s a different, it’s just a fundamentally different type of investor.
But kind of back to this, this alternative raisers or alternative issuers. I think one of the areas that is changing very, very fast as kinda the digital marketing, digital entrepreneur space. And my, my thought on that is that, you know, you have a generation of entrepreneurs who been in business for about 10 years, maybe a little bit more, maybe a little bit less, but it, the space has matured, right? You know, the first, I’d say 2000 to 2010 there were lots of dot coms and there were lots of things like that.
But like, there wasn’t, that was the growth of marketing as kind of a I don’t know, like a way of life that a lot of digital marketers and digital entrepreneurs like have lived it and built great businesses and everybody that I know in this space, you pick your sector from publishing and media to supplements to fitness, every single person I know can name a handful of people who built a hundred million dollar company and it’s a hundred million dollar company that was bootstrapped in a hundred million in revenue, not in valuation, a hundred million in revenue. It was bootstrapped, never raised capital. And for whatever reasons had a lifecycle, not a lot of ’em disappear after four or five years, they shrink.
And, and part of that, I think, and call ’em ghost Unicorns for this reason, is these are people who built these amazing businesses with no knowledge whatsoever of the world of raising capital, the impact of raising capital building a business beyond kind of their marketing funnels, right? Their businesses that were built on marketing funnels.
And that represents to me like a huge area of interest because this is a group that actually is kind of like their masters at online distribution, which is perfect for these kind of raises. And so I do think that there is I’d say a growing knowledge of the import or the impact of raising money in this area.
And so we’re starting to see this in the influencers and the creator economy and all these people talking about like Venture and raising capital. Mr. Beast has VC funds Kim Kardashian all the influencers are starting to have ’em, and there was this kind of, this, this boost of it. And they were doing that because they realized that they were distribution channels for product, but they’re also distribution channels for capital raise.
And I think that, that that area again represents this enormous potential growth for this sector because the other forms of cap raises are outside of their world, right? In the sense that I have to go learn venture, I have to go learn public markets in the beginning. But if you say like, I have a page and I have analytics and I can market to people and raise money I live in that world, that that’s fine.
That’s a funnel.
And so I don’t know like if you’ve seen much interest from that kind of space at this point. Cause I think that, I think it’s still very early, personally, but I do think that just talking to founders in the space and, and other folks, I think it’s, it’s, it’s an area that’s gonna explode over the next, I’d say five years.
Rebecca Kacaba: A hundred percent, a hundred percent. We’re having a lot of those conversations right now, and those are the people who intuitively get it. Because they’ve exactly as you described, That’s the evolution of their business, right? If you have some kind of influencer celebrity status, you can use that as a channel to distribution.
Why wouldn’t you put yourself on the cap table in order to make extra returns on that? You know, you look at Tom Brady with Under Armour, brands like that who’ve gone wildly successful. Ryan Reynolds probably being the one who’s most active and prolific with it right now these days in just applying that formula again and again, and it becomes hugely disruptive I think, as time goes on to the traditional capital markets where you’ve got people going around, making introductions based on relationships, and now you’ve got folks who have a direct distribution channel who are saying, I can do this myself. And by the way, every time I do this, I’m gonna put a bit of money in Kim Kardashian through her fund and just multiply my returns.
So, A lot of those conversations that we’re having right now of people who, who see how they can use this as a channel for their benefit, and automatically when they see the data analytics, they can see how they can benefit from that. A big focus for us is to bring those analytics right into the platform, show them to the everyday business that’s raising capital, and really give them the toolkit so that maybe they don’t have that level of understanding.
As the more sophisticated players in the space, but we can really show them the playbook through the software and say, look, if you do this, this, and this, this is how you increase distribution. These are the analytics that you can take away. Mm-hmm. Here’s how to do your shareholder communications. And then our team can really encourage them to think about how that can benefit their business.
John Newtson: That makes sense, that makes sense. So then, I mean, distribution seems to be kind of fundamental then. That this is like, the essence of, of making this work is you have to have models for distribution either existing audience, existing community, the ability to go out and do paid marketing PR at a large, like.
And I know you guys do a lot of distribution work for your issuers, right? Like that’s, but that piece seems to be like, it’s just, it’s integral. Like you have to have it, right?
Rebecca Kacaba: We do. So, so deal maker reach has a great formula for it. It creates great distribution. They don’t, I think there’s a lot of misconceptions about the space and worries about like bad deals.
Like bad deals don’t sell, like people aren’t unsophisticated, right? They know. When a deal’s good and a deal is bad, and you know, when we were in Washington the other day, we made that clear to the regulators like, like bad deals don’t sell. So they know the distribution methodology when you’ve got a good deal that people are gonna want access to reasonable valuation, good terms.
And we have a lot of digital marketing partners as well. That are creating specialization in this field because it is a performance marketing versus just like you said, those IR that are touch points on the landing page. When you have all these data points, you can actually drive a much more astute campaign for a person, and so that’s what we’re eager to bring to the market.
Just as we bring that level of sophistication to the market through the software, we bring the cost of this down and grow the ecosystem.
John Newtson: And so then switching to like the investor’s perspective then, because one of the things you said, like there’s, there was a perception that the quality of deals is a problem.
And we’ve definitely seen an increasing quality of deal coming into space. But what’s your view, if you’re talking to an investor who’s like, I’ve never heard of this before, what’s your kind of like, explanation to them of like, why this is such an exciting space.
Rebecca Kacaba: Well, I think investors get excited about it when they have connection to a specific story.
And so I think there can be a bit of a misconception that investors are gonna attach to every early stage story. Like they, especially with the trend of impact investing, want stories that personally appeal to them. But I think the investors who are in the space inherently understand the ability to make outsized re returns The earlier stage you go, and if you look at early stage VCs, You know, their, their models and their numbers are based on a one in 10 success rate.
So everybody who isn’t familiar with this space will say, oh, every single deal isn’t good. Right? But like every single deal that a VC invests in isn’t successful either, right? So you’re. Creating a portfolio and playing the odds. And that’s part of what the legislation does in making sure that the amount people invest isn’t going all in on one deal.
They have to invest small amounts in a large number of deals and have some fun with it and see where it goes.
John Newtson: Yeah. And are you seeing that there’s different types of investors coming in, like you’ve alluded to this before in terms of like, you have older groups and you have kinda younger groups, but are you seeing like advisors, is there an interest from like, kind of more, more I more professional or semi-professional investors at this point?
I know the limits on it make it kind of a difficult thing for a lot of ’em.
Rebecca Kacaba: Yeah, I would say, you know, between, depending on the year, it’s anywhere between 20 to 40% of the investors on these deals are accredited investors.
John Newtson: Really?
Rebecca Kacaba: So, yeah. Those folks are in, they’re playing the space, they’re reading the materials, they’re asking the companies astute questions.
And they’re participating sometimes, you know, 50, a hundred thousand dollars check.
John Newtson: It is a young space and so I would say like the number of success stories that are big, like that people are like, oh, you know, like in vc everyone talks about, oh, I got into Uber, I got into this, I got into that.
But you know, that’s over like how many decades of work this, you know, like you said, was it 20 15, 20 16 when the Jobs Act started. And so this is still a relatively young set of invest investments.
Rebecca Kacaba: Yeah.
John Newtson: But we are starting to see some successes, right? Like that are like, but that exit piece and that success story piece seems to be kind of one of the things that needs to happen for people to get more and more excited about this space.
Rebecca Kacaba: It does, and I think having more players in the space, like us talking about those is helpful. A lot of people don’t know that Peloton started as a Kickstarter campaign. You’ve got folks like Mercury Bank in California cleaning up after Silicon Valley Bank. They’ve taken on all the contracts. They’ve done equity crowdfunding in their past.
So there are a lot of stories like that that are really successful. Sometimes we look to the European market where, where this has been around a lot longer, over 40% of the capital that closes in the UK closes through a digital platform.
And if you look at some studies out of Italy, of the stories that financed this way, between 2014 and 2019, nearly 10% have exited. So that’s right on track. In an ecosystem where it’s been around a little bit longer.
John Newtson: That’s amazing. So, yeah, that’s great. So the time, just the time factor, I think is like, this is one of those things that I do believe that as we go forward, this becomes a larger and larger segment of all cap raise here too.
40% in the UK , that’s remarkable.
Rebecca Kacaba: It is. I mean, even back in my legal career when I was doing work for some of the incubators, right, they’d be taking in 10 companies, I’d be doing incorporation docs at a discount so that we could help them on future transactions and really giving them low cost to get off the ground.
And you know, it was about in a cohort of 10 a year and within five years I had seen one do an M&A exit. So that’s around the numbers that I’m familiar with in the ecosystem and seems right on track.
John Newtson: Nice. All right. So then let’s look at this one with just like the internal platform kind of side of this.
You guys are, I think, probably the leading platform in this space. How do you see the competitive environment right now?
Rebecca Kacaba: Yeah, I would say, I mean, in terms of capital transacting through a system, we’ve done close to $2 billion. So I don’t think there’s any other player even close in terms of the amount of volume and capital they’ve processed.
But I really look at it as, you know, having more players in the ecosystem is a benefit. Having good players who are promoting the ecosystem in the right way is really important because that benefits us all. And so the more players there are the more awareness that will be brought to the space.
But we’ve really taken on that mantle. I think Republic for a long time was, was doing a lot of it, Start Engine done some of it. And we are really going and trying to bring new different types of stories to the space now that will benefit everybody.
John Newtson: When I think about like how, you know, I dunno if it’s your messaging or, or, you know, your business has evolved over time, but if, if I remember right, you guys started really with the, like making the, I’d say the UX for the issuer the easy thing right there, there was so much paperwork and I remember we had this, we had a publisher who did some, a Reg D kind of service and they, they raised a bunch of money back in, this was what, 2010 or 11? They raising a hundred and something million dollars for four deals. And those companies were just overwhelmed. how the hell do I manage 4,000 investors? You know, overnight. Like, I don’t have like the phone teams. That was a huge problem for them. And so, if I remember right, that’s kind of where you guys started, right? Is solving that kind of a problem.
Rebecca Kacaba: Yeah, just listening to our clients trying to make their lives easier, trying to allow all of that communication to be digital and make sure that they can keep their investors happy and communicate with them in a really seamless way.
Whether it’s uploading 5 0 6 C accredited verification documents you know, my background was legal, so coming at it from providing an infrastructure that’s secure and compliant for the space is the approach that we really took, and then allowing issuers to really take control of the raise and run it themselves themselves.
So not having an intermediary stand between them and their investors. But really allowing those two parties to communicate really seamlessly. That’s the beauty of, I think what technology has done in so many different spaces and what we’re bringing to the capital markets is really decreasing the number of levels between a company and an investor.
And so now, you know, we’ve been in market, I did the seed round probably five years ago. And we did a retail raise alongside a bought deal. So that was really exciting because never in my lifetime did I think that we could enable retail folks to sign subscription agreements, make payments, get their allocations at the same pace as an investment bank would run a bought deal, you know? When I’ve been doing those my whole career, those happen in like five days. It’s super fast, super urgent. Everybody in the investment bank and the law firm’s up all night making sure that deal closes and now we could bring in thousands of retail from the comfort of their own home into the same transaction.
That’s the beauty to me, and what I get excited about, technology enabling. People to have that kind of access.
John Newtson: And, and what, how’s your, how’s your platform evolved now since, since then? You guys have been working quite a bit on like, you’re constantly innovating and not just talking about the space, but I mean you’re working on the platform quite a bit all the time.
Rebecca Kacaba: Yeah. We have full in-house dev team about over a hundred people that are constantly making improvements to the platform. So we’ve launched. Things like removing escrow from transactions. Right before we started, every single reggae deal went into escrow and then got released. We read the legislation, we looked at the rules and we said, you know, I think this would be a lot more seamless and issuers could get their money faster if we just eliminated that party and that step and that cost from the process.
Right now we’re launching new things where we have a lot of. Our, our in-house marketing team and some of our marketing partners are really using perks on the deals in different ways. And so we’re building out the flexibility where you can offer different bonus shares or incentive structures, whether it’s, you know, a case of beer on your birthday, like the original BrewDog story, or whether it’s something else, like a 10% discount if you invest more than $5,000.
We’re building out the technology to allow for those differentiations and allowing people to AB test their own offering. So when you’re doing this at a large, 75 million scale, those kind of differences and changes in ticket size mean the world to an issuer in terms of cost of capital, and that benefits the investor as well.
The thing that I’m most excited about is the access to data that we provide and some of the predictive models that we’re building out so that you don’t have to sit in a spreadsheet and say, okay, well if I do this, this is how much capital I raise. It’s gonna be 5 million bucks. Now how am I gonna spend that in the business?
The software can just tell you, Hey, if I do this, this, and this, that’s what’s going to raise me up to 5 million bucks.
John Newtson: Just that sentence you can ab test your offering is not a sentence that was ever uttered five years ago.
Rebecca Kacaba: Yeah. Yeah.
John Newtson: But that’s awesome. That’s remarkable.
So like, I guess the last thing that would be just what do you see as the path of growth of the space? Or what are the things that are either the main drivers or that could happen, that could really kind of catalyze growth in this space.
Is it policy?
Is it just user adoption, kind of like getting, getting some big success stories so that people can com kind of pile in? Or what are the limiting factors right now?
Rebecca Kacaba: I think that’s it. I think the biggest limiting factor is awareness and I’ve seen the awareness transform over the last five years.
I get on a call. Yesterday with a different law firm who we’re speaking to about working with some of their clients, and they all know and understand what re A is. And the, not only that, but their perception is, is is generally on track. Like there, there wasn’t a lot of misconception about it. So to me that signals.
The growing awareness and acceptance as of this, as the third pillar of the capital markets, the way Congress intended it. And I think exactly as you said, more big brands or people just being aware of brands like Peloton who are successful and have used this. You know, you’ve got sub stack who did this recently, like these are big, valuable companies.
Yeah, yeah. No, Substack’s had a very successful raise. Really, really fast too. I remember watching that from the time I got the email. Like, just refreshing the, and it’s like they, they went quick. And that was really cool to watch.
Yeah. I think, I think the longer we’re around and the longer we can talk about those success stories, the more comfort people will have of it because I know some of the players in the market can be a little bit hard on ourselves and I, I do think. That’s important in keeping us honest and growing the space. But I also think we have to take a step back sometimes and say, you know what? Like that was a good thing. We got some companies financed there that maybe otherwise wouldn’t have because they don’t have a business model that would’ve appealed to Wall Street or a VC who’s looking for a very specific formula.
And we got some people some good wins there and And that’s a good thing.
John Newtson: I definitely see that. I think that the, one of the things with the VC world, if you just look at that, is that how much it’s aggregated so much that even now, a unicorn isn’t really that big of a success now it’s gotta be a deca-corn, right?
Like, cuz capital has aggregated into these massive firms. And so this space offers another channel for raising capital for the, you know what’s, it’s kinda like the, what’s wrong with a hundred million dollar company? Nothing. Yeah, nothing is wrong with a hundred million dollar company. Like that’s a great company.
Rebecca Kacaba: Yeah.
John Newtson: And so I do think that, that that is one area , and I really fundamentally believe that the merging of digital marketing in the digital marketing world with capital raise is the trend that we’re gonna see, I would say, in this next business cycle here. And that’s why I’m so excited to like, watch you guys and see what you’re doing, because I think it’s gonna, it’s gonna be a, an explosive growth that just kind of starts to happen.
As you get more success stories as you get more entrepreneurs in this who, who never thought about raising capital, who realize, hey, my skillset is already perfectly attuned to raising capital like this.
Rebecca Kacaba: Yeah.
John Newtson: That is exciting as hell for Yeah, I know. Who’s, who’s looked at it from my side of the world.
Rebecca Kacaba: Yeah, for sure. And I think, you know, the growth that we’ve seen over the last five years has been like drinking from a fire hose. And I think that’s just gonna continue as the awareness comes because there’s something here that’s resonating with people and there’s something here that people are getting a lot of value from.
And so we just need to keep that awareness growing and that trend continuing.
John Newtson: Yeah. Awesome.
Well thanks Rebecca for being here. I really enjoy talking to you all the time and I love kind of getting your views on the space cuz you’re right at the forefront of building the infrastructure that the Jobs act kind of intended when, when they passed that legislation.
Rebecca Kacaba: Thanks John for having me. It’s been a pleasure.
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Equity crowdfunding – both with a CF raise and the larger Regulation A and Regulation A+ vehicles – is a big part of the digital transformation of capital markets.
The Jumpstart Our Business Startups Act (JOBS ACT) created the sector in order to help more companies raise capital and allow main street investors more direct access to private markets.
Once the policy opened the door it was up to entrepreneurs, like Rebecca Kacaba, to actually build the infrastructure to allow the equity crowdfunding space to flourish.
In the process something remarkable happened – capital raise began to merge with e-commerce marketing models.
And that part of the equity crowdfunding revolution is having dramatic impacts. Here at Media Meets Markets, we believe the full opportunities of this merging of digital marketing and capital markets are grossly underestimated.
My guest today is Rebecca Kacaba, CEO & Co-founder of Dealmaker.tech. In the world of equity crowdfunding platforms for companies & investors looking to participate in Regulation A and Regulation A+ vehicles, Rebecca and her team are the leaders.