OfferBoard isntAngelList nor FundersClub. Its a platform designed to make crowdfunding work for growth capital. But instead of tech startups, the company supports general solicitation for multimillion dollar financing projects in spaces like real-estate and oil and gas.The acquisition is to bring the platform in-house so Entoro Group can support its own deals.
The reason OfferBoard can do this is Title II of the JOBS Act.When Title IIwent into effect in late September of 2013, it was largely ignored by the tech community, at least with respect toNaval Ravikant and Co.s Title III which brought equity crowdfunding into the everyday Valley lexicon. But toChris Tyrrell, Title II, aka thelegalization of general solicitation,was where the real money was going to be made.
In the past it was illegal for private companies to publicly advertise that they were raising investment. Buteven after the laws changed, it was tough to actually raise money because more traditionalindustries lacked the software infrastructure to support solicitation. ThoughOfferBoard exists in different forms for each client and use case, it is that infrastructure in its simplest form.
James Row, managing directorof the Entoro Group, gives the example of a private company looking to finance a drilling program to explain the synergies that OfferBoard will bring to Entoro. A business with 20k acres of leased property and the right to drill still needs money to build wells. At this level, that generally means raising 10s of millions of dollars. Said company would approach Entoro and they would run diligence and piecetogether a preferred equity deal to finance it.
Energy is the ideal space because it hasknown deal flow, assertedRow. There is a fragmented gap between buyers and sellers, we just need to be a better match maker.
OfferBoard, originally launched out of stealth on the stage of TechCrunch Disrupt New York in 2014.Tyrrell was working for a family office at the time he thought of the idea, but the way he got into the startup ring was unorthodox. Rather than bootstrap in a garage in Menlo Park, he bought tickets to Australia and nabbed the license to a technology being developed by a public Australian company.
Between then and now, the company hosted over $150 million worth of deals acrossa varietyof industries. But instead of building out a software platform company,Tyrrell decided to match his market entry strategy withan equally unorthodox way out, selling to aHouston-based investment bank in a wonky transaction that also involves the merging ofClearinghouse Securities and OFSCap LLC to form the aforementionedEntoro Group that is ultimately purchasingOfferBoard.
At the time of the sale,OfferBoard had hosted an estimated 50 deals at an average of $4million in value. This brought the company about $8 million in total revenue roughly split across the last three years as $1 million, $3 million and $5 million.
I came to a realization that companies with a niche were going to win the day, saidTyrrell. Thewinners will start now and win 4-6 years from now.
But despite growth,Tyrrell insisted that the industry supporting equity as a whole is running 8-10 years behinddebt platforms. The group has been slowly winding down its practice to slow growth and become profitable, streamlining by cutting its 10 person workforce in half.OfferBoard raised a total of $3.1 million from nine investors that largely consisted of high-net-worth individuals and family offices.Tyrrell will be joining the board of theEntoro Group but wont be taking a formal role beyond that.