Hum Capital CEO Blair Silverberg thinks that the future of fundraising requires a return to old school Wall Street – sans the fraud.
Back in the day, he explained, people would go to Wall Street and request funding for different projects, such as a rail line from New Jersey to St. Louis or a new store. A banker would chat through all the financing options, analyze different tradeoffs, and eventually help business owners pick the best capital option for their goals.
“It was very, ‘let’s think about the problem we’re trying to solve, and then let’s make the financing fit,’” Silverberg said. “Today, we do the opposite.” Even with ample capital in the market, startup check-writing is still a game dictated by warm intros, cold pitches, and oftentimes, sheer luck that the founder bugged the right person in the right way at the right time.
Silverberg said the current climate forces founders and investors to do a “crazy adversarial dance” when it comes to partnerships, which feels “backwards.” He wants his startup, Hum Capital, to bring optionality back into the mix.
“The dream scenario is that any company in the world uses Hum to articulate what they’re trying to do with their mission, and then gets all the relevant forms of financing just sitting right there waiting for them to pick the one that makes the most sense,” he said. No term-sheets for term-sheets sake, but instead, Hum Capital can be a clear way to visualize and compare different financing options for a company’s goal.
The nod to nostalgia has helped the startup land fresh capitalization for the future. Hum Capital announced today that it has raised $9 million in a Series A round led by Steve Jurvetson’s Future Ventures. Jurveston was an early investor in SpaceX, Tesla and Memphis Meats, which Silverberg thinks symbolizes that “[Hum Capital is] an equally world changing company.”
At this stage, Hum Capital’s product is easy to explain: it uses artificial intelligence and data to connect businesses to the some available funders on the platform. The startup connects with a capital-hungry startup, ingests financial data from over 100 SaaS systems including Quickbooks, Netsuite and Google Analytics, and then translates them to the some 250 institutional investors on its platform.
It’s a navigation engine for startups that aren’t sure whether they should go for venture debt, traditional VC, revenue-share financing options, or others. The average deal size is $6.4 million, but Hum can help founders access checks up to $50 million for their businesses.
Image Credits: Hum
Hum is free for startups and investors to use for data-sharing purposes and eventual connections. The startup makes money by charging a 2% marketplace fee on capital raised whenever a deal is closed through its platform.
Founders could theoretically use Hum to meet investors and then close the deal offline to avoid the 2% fee. Silverberg said that most users to-date don’t do this because they want to be repeat customers during future fundraises.
Hum’s biggest challenge is that it isn’t human. In venture, especially at the earliest stages, most check-writing comes down to an investor believing in a person’s ambition (and maybe their pitch deck). Hum leans heavily on data as a determinant of success, and while numbers don’t lie, it could mean early ideas with big ambition are left without options.
Silverberg argued that Hum isn’t meant to replace chemistry, but can work to make sure that the business makes financial sense for an investor. Meetings still matter, but with Hum, he thinks a founder and investor can spend the 30 minute meeting talking about mission and vision, and skip other basics of the business.
Fair rebuttal aside, Hum could be limited in the sorts of startups that it funds long-term. It doesn’t need to find ways to fit into traditional VC – since most businesses aren’t venture-bacable, but it will need to find a way to make sure high-quality investors consistently use the platform for deal flow. Today, much of the investment on the platform is classified as venture debt.
Early adoption suggests some early trends. Companies from 46 states have uploaded data to its Intelligent Capital Market (ICM) platform, and nearly half of all companies on the platform come outside of California and New York.
To date, the platform has helped facilitate more than $400 million in capital transactions across 150 fee agreements. The majority of that money moved between March and now, with customers including SecurityScorecard, Evolv AI and Flaviar.
Hum Capital’s raise is announced in a time where traditional financing feels challenged: Carta just raised money off of a valuation it set for itself, Brex launched a $150 million venture debt business, and Clearco, an alternative to VC, raised money from VCs at an over a $2 billion valuation.
“[Resource allocation] as important as making the world multiplanetary, or global problems like climate change,” Silverberg said. “…We’re at the book sales stage of Amazon.”
from TechCrunch https://ift.tt/2Yen8CL
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