DealMaker is part of a new group of broker-dealers that are focusing on online capital formation, providing a tech-enhanced environment for companies looking to crowdfund a securities offering. Based in Canada, the company has been recognized as one of the fastest-growing young firms in the country. Since inception, DealMaker reports having helped founders raise approximately $1.9 billion with over 780 funding rounds.
Last month, DealMaker shared some information pertaining to platform performance during 2023. DealMaker reported that issuers raised about $41 million during September and October, with September recording approximately $15 million in investments and October moving higher at $25.6 million. In August, DealMaker generated $25.9M million in funding. The solid report arrived at a time when VC activity has been muted.
CI reached out to DealMaker CEO and co-founder Rebecca Kacaba to inquire about platform performance and her expectations for the coming months. Our discussion is shared below.
How did DealMaker perform in 2023? Did you top expectations? Meet them? Which exemptions performed the best?
Rebecca Kacaba: Amidst the market chaos, we had a lot of firsts this year. We had two issuers go public on NASDAQ (MGRM and AIRE) creating liquidity for investors and building out our broker-dealer partnership base substantially. Our Enterprise division came to fruition with a significant roster of enterprise clients and crowdfunding portals. Our activity saw over $200M raised across 165 raises. We are still seeing a ton of growth in the space, while VCs and IPOs are seeing their lowest numbers since 2015/16.
On the DealMaker tech, Reg CF deals grew by 342% from 7% of our capital raised to over 31%.
Reg A stayed steady [Year over Year], although the raise amount per deal did increase.
In regard to online capital formation, what are your expectations for 2024?
Rebecca Kacaba: Many analysts are bullish on 2024 – seeing that the Fed’s move will bring much-needed relief. For the retail markets, 2024 will rebound – how fast and how far is yet to be seen. The need for capital from private companies is stronger than ever, as 2022 and 2023 both saw VC and institutional funding dry up. We predict an increase in amounts raised in the private markets via non-traditional means. We anticipate a lot more exemption raises in 2024; we think many smart founders will leverage a Reg CF to test the waters before proceeding to a larger raise. Founders are starting to better wrap their minds around the founder-friendly nature of equity crowdfunding and the long-term ROI the community building serves.
Additionally, changes in consumer preferences show that individual consumers want to be more aligned with the brands they buy from, and nothing does that like opening up the investment opportunity to a community of customers. We expect more forward-thinking founders to be early to this trend.
Which industry segments do you expect to perform well in 2024? (IE AT, Tech, Fintech etc.)
Rebecca Kacaba: All tech companies we think will continue to outperform other industries: AI, robotics, cleantech, and spacetech all seem to have a lot of momentum from 2023 to carry over into 2024. We also predict an increase in CPG companies that have established communities and/or are considered ‘influencer brands’ leveraging this type of raising opportunity as well. With a built-in community of fans, converting that into capital is a win-win.
What does your Q1 pipeline look like? Is it mostly Reg A? or Reg CF?
Rebecca Kacaba: Inquiry around Reg CF has increased. Those considering a Reg A raise are growth companies and not early-stage. As founders have seen traditional funding dry up, many are just now learning that alternative paths to capital allow them to control the terms. Inserting an exemption raise or community raise into their funding plan makes sense in 2024.
DealMaker keeps adding features/functionality. What is in the queue for 2024?
Rebecca Kacaba: 2024 is going to be a big year for our products and services. We are harnessing the power of AI [artificial intelligence] to simplify the capital-raising process while maintaining compliance and decreasing friction. We are building out powerfull new AI features for DealMaker that will add immense functionality benefits to issuers while also making investing much more streamlined for shareholders and investors alike. We are also expanding our service offering to ensure that founders see us as a one-stop shop for all of their funding rounds – now and in the future. Stay tuned!
What are your biggest challenges?
Rebecca Kacaba: Believe it or not, most founders are still unaware that there are alternative paths to capital. Educating founders that there are other ways to fund their business is the biggest thing holding us and the whole industry back. Also, smart VCs and family offices can see this as another tool in the arsenal for their portfolio – it’s an incredible way to create an engaged community that also acts as a competitive moat around the brand.
In the past, you have alluded to your global ambitions. Is this the year you expand into the EU to take advantage of ECSPR?
Rebecca Kacaba: It is definitely on our minds to pursue this expansion route. The market in the EU is extremely viable, and in some countries, Equity Crowdfunding has been around longer, just slightly nuanced from the US approach.
What about secondaries? Where does DealMaker stand in enabling liquidity for private securities?
Rebecca Kacaba: We are always open to paths that help issuers and investors in private securities access liquidity – it’s the final step for all issuers and investors alike. For now, we’ve been excited about past success with two issuers that went public on the NASDAQ (MGRM and AIRE), and more to come in 2024.
Earlier this year, Dealmaker hired a new CFO, Mike Rasic. He has experience in raising money for mid-stage firms. Will Dealmaker raise growth capital in 2024? And if you raise money, will you offer a portion to retail?
Rebecca Kacaba: Great question. We always have big ambitions to grow and expand, and 2024 is no exception to that.