OffDeal raises $12M to build the first AI-native investment bank for small business M&A

Appreciate it. Take care. Have a great one. Bye. Up next, we have uh a someone who proved the uh oh, cinematic viral videos don't work anymore. Yes, they do. They still got it. He beat the odds. Uh very excited to have Dr. Let's bring him coming in from off Deal. How you doing? What's going on? Hey J, how's it going?

Good to see you both. It's going great. Great to see you. Enjoyed the Financial Times article. We love the Financial Times. We got the delivered. We get it delivered in print every day. We have, you know, tons of respect for the Wall Street Journal and the Financial Times.

Uh it may make sense given your uh given your company and your target market. Uh but talk to us about the company and the target market. What are you building? Uh yeah, so we're building an AI investment bank. To my knowledge, it's the first one of its kind.

Probably the easiest way to think about it is uh think of what what would Goldman Sachs look like if it was started in 2025 and not like 1865 or something like that. Yeah. Right.

So, uh, we have our own software, our own data, um, our own infrastructure, our own bankers, um, and we just ripped sells for small businesses that are ignored by traditional banks. Let's go. That's awesome. Yeah.

When we we met, uh, just over a phone call a couple months back and, uh, my first question was, why not, you know, build the software and just make it available, the Harvey approach. Yeah. The the sort of more uh, SAS approach. And I think it'd be awesome if if you kind of broke that down for for our audience today.

Yeah. And I'd be lying to you if I said that we didn't consider uh building software for banks. And and I do think there's some great products out there like Rogo and some others that that are doing good work.

Uh but when we were thinking about this uh from first principles, we saw how bureaucratic large banks are and how long it takes to enact any meaningful change.

Uh I personally spoke to you know dozens dozens of bankers when I was asking them what is the most requested sort of like problem that you want us to solve they would say uh call transcription and I would say well zoom exists and they said well we using Cisco Webex and I would say well Cisco Webex has zoom trans or call transcription and it would say oh we don't have that allowed and that you know I'm being a little bit facicious but that is verbatim what the number one requested feature was and I was just kept thinking to myself if I was running my own bank I would completely different.

And uh we kept kind of noodling on this, noodling on this and then we uh eventually came across an article from Sarah Tel from Benchmark that famously said um sell work not SAS.

And uh after some uh deliberation, my co-founder and I decided to go all in on a crazy idea of being your building our own investment bank from scratch. And so here we are um you know just over a year uh since we started and uh you know closing all kinds of deals. Yeah.

break down what what your initial deals have looked like, what what kind of businesses you you're targeting. I know it's generally companies that are valuable but but not big enough kind of ticket sizes to get uh the traditional investment banks on board. Yeah.

So even though we say that we're what Goldman Sachs would have looked like in 2025, we're not actually trying to compete with Goldman Sachs. we're we're much more interested in going after uh the market that is currently unserved by uh legacy incumbents because the unit economics don't make sense.

So there's millions and millions of small businesses in America. Uh and hundreds of thousands of them change hands every year. Uh for vast majority of them, they end up doing it on their own.

Uh like less than one in five small businesses under $10 million as you duh actually have a self-ight advisor, which is kind of crazy if you think about it, right? It's the most important sale of their life. It's an asset that's worth over 80% of their net worth.

And you know, these business owners, plumbers, roofers, etc. , they're just doing it on their own. I've personally experienced this actually all the way back in 2019 when I tried buying a small business. Uh, and it was a complete disaster.

I was talking to brokers or I was talking to owner operators who didn't really know how deals work. It was really hard to get a deal done.

Um so when we saw you know this opportunity we got really excited because AI allows us to have vastly better unit economics and therefore go after the segment that's currently uneconomical for the hula hookis or their lazards or ever corores of the world. Yeah.

So when I think of Goldman Sachs, I think this monster bank that's not just an investment bank. They also have wealth management and you know not just sellside advisory but you know uh you know uh like sellside coverage and they're doing you know buy sell hold reports and then they're also doing IPO stuff.

Um but we're talking here specifically narrow it down to M&A then take it down into the mid-market and then take it down even further. And there's been companies that have done kind of like the it's a buy and sell a company platform at the super subscale.

You can I mean Justin Khan famously like sold a calendar app on eBay. He sold a company on eBay for like a I think a $100,000 a couple hundred thousand.

Um, but walk me through the actual uh the actual approach because when I think of a traditional M&A advisory firm, it's it's find the companies, build the relationships, then build the materials, then value the company, then be kind of a back channel while everyone's talking to actually get the deal done.

A lot of that feels automatable, but what what in the flow do you feel like is the lowest hanging fruit? How does it all piece together? Yeah, maybe it's helpful to think through a journey of a off deal customer, please. Um, when we think about this, so I'll speak about a deal that we recently closed.

It was a, uh, a monastery school in in Arizona. Um, they actually tried selling it on their own, uh, but the private equity firm told them um, the business was too small for them from a cash flow perspective. Uh, so they somehow found us on Google.

We have this cool AI tool that people can check out that allows you to put in your company website and we preview some of the potential buyers for your business because we built a proprietary data layer over millions and millions of businesses.

We have our own recommendation engine so we can actually pinpoint which companies in the United States could be potential buyers. So they got in touch with us and we decided to take them on.

Um what we did is our banker uh used our software to identify every single monastery school in the United States, find their contact information, who the owner is, etc. Then we reached out to them. There's about,00 of them that we've talked to. Um 72 of them signed NDA.

Um you know, that means all of those people got to check out the SIM that we put together, the financials, etc. Uh about 20 of them actually met with management um in person for meetings.

and then uh uh four submitted final offers and then the the offer that got it over the line was 40% higher than the first one that came in and it was an old cash deal. Congratulations. That's amazing.

And the cool thing about this is that um even though most of what we do does involve private equity buyers or private equity back strategics, in this case, we were able to bring a subscale asset to market and activate companies into being buyers when they weren't actively looking for a business to acquire, right?

Because the investment banker on our team just reached out to Monastery Schools and they said, "Hey, are you interested in expanding expanding your footprint? We're actually working with a school that looks a lot like yours, etc.

" These kinds of things are only possible with AI because the the the bio universe is just so so fragmented. Yeah. Right. And so we find our own software for each part of the workflow. Sure.

How do you avoid the uh I I feel like VCs get these emails a lot where they'll get an inbound email from uh an investment bank and it's like, "Hey, I have somebody interested in buying your a ton in e-commerce. " When all this e-commerce rollups is happening, it doesn't matter how much money you'd raise.

because they'd be like, "We'd love to buy your business for 200k. " And I think that's a that's a challenge for you guys. You eventually want to get to the point where you're selling thousands of companies a year.

You want to make sure you're not sending millions of emails that people are looking at being like, "Okay, this is clearly not nobody a person did not approve sending this email. It was part of a kind of an automated system. " Yeah.

So, uh this is a literally a daily point of discussion like what does this look like when we're doing hundreds and hundreds of concurrent deals? Uh the the nice thing is that we're not spraying and praying indiscriminately, right? We we we actually pinpoint uh buyers and we're very thoughtful about who we reach out to.

So today the volume is not as high as you might think uh from a pure outreach perspective. But the nice thing is that there's a network effect here, right?

Because every time we interact with a buyer, they join our platform and next time they just get an instant notification when the deal matching our investment mandate shows up. And and actually right now we have about 30 businesses for sale, right? ranging from, you know, million to almost eight billion dollars in Utah.

And there is dozens of private equity firms that are participating in multiple of these sell sites, right? Um it might be different teams, right?

You might have like an industrial team versus a, you know, a healthcare team, but but these firms get onboarded onto the platform and then from then on they're repeat customers because they're going to be accessing deals all day every day. That's their job, right?

So that's kind of the long-term play here is to build this uh you know ecosystem of of buyers and we track by the way all buyer behavior right so we know who's bidding on what how much are they submitting how do they like rank to structure deals etc. So there's a lot of firstparty data we're collecting.

It's going to be tremendously helpful moving forward. Very cool. What's the goal? What's the goal for the next 12 months? What's the deal the deal volume? So the the nice thing is that the messaging has been resonating really well.

Turns out that, you know, an average business owner in America has already heard from like a 100 private equity firms banging on their door because everyone's doing rollups and the LBC's even getting in for roll-ups, etc.

That's been actually great marketing for us because an average private equity firm will look at about a hundred opportunities before pulling the trigger on one.

And so it's a pretty bad user experience for for the sellers who, you know, end up engaging with one of these guys maybe twice, three times and then they get ghosted at the 11th hour.

So when we come in and we say, "Hey, we're able to uh flip the script and put you in front of a hundred buyers so only one of them is the lucky one to buy your business. " That's been really working really well for us. So, in terms of our pipeline, uh like I said, we already have 30 businesses for sale today.

Um we have over a billion dollars worth of businesses um you know, in the near-term pipeline sort of over the next uh 9 to 12 months that we expect to launch.

And the ramp has been just exponential both from the inbounds, right, and the referrals we've been getting, but as well as our outbound motion has been very effective.

Um our internal metrics sort of for for end of 2027 is to hit $und00 million in fees uh which will require based on current level of automation about uh 15 or 20 bankers, right? So each banker is able to do about 10 cell sites concurrently. Wow. It's amazing. Wow. Uh and what's the news? Raise money.

Well, the news is that uh we got 12 million bucks in funding. Congratulations. Great stuff. Thank you so much for hopping on. Awesome having you on the show. I'm sure you'll be back on soon. Yes, we got to hit them up. I have this interesting idea. I was thinking might blow people's minds.

I'm thinking about buying an HVAC business. I don't think anyone's thought about this roll up. You're selling three. Okay, I'll go to you. Perfect. Might be the first one. Your next uh I got one feature request.

I think you should you should add Tesla robots to the platform that can go have steak dinners with potential clients because that's the one we're training a model that can play golf with people right now. Yeah, that's key. That will be the final unlock. That's the final investment bank.

If you can eat a steak dinner and you can golf, I'd like to see AI do that. Goldman Sachs cooked. Absolutely cooked. Thank you so much. Awesome. Have a good one. We'll talk having you on Ory. Cheers. And we have our last guest of the day hopping on the