A Little Bit About Rebecca:

Rebecca Kacaba has been honored as one of Lexpert’s ‘Top 40 Under 40’ in the legal field and was recognized as one of North America’s most innovative lawyers by the Financial Times. She practiced law on Bay Street for over 10 years and was co-chair of the Toronto Venture Technology and Emerging Growth Companies Group at a global law firm while she worked in Canada’s financial district. 

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TRANSCRIPTION:

JP McAvoy: Hi, and thanks for joining us on today’s show. We’ve got Rebecca Kacaba joining us. She is the Co-Founder and CEO of DealMaker. She’s working with Founders to find money, digital capital raises, as you’ll hear in our conversation. Here’s my conversation with Rebecca. Rebecca, thanks for joining us here today from “the Big Smoke” Toronto. How long have you been there?

Rebecca Kacaba: Yeah, thanks for having me, JP. I’m always excited to speak to other entrepreneurs and Founders. I have been in Toronto all my life.

JP McAvoy: There you go. So born and bred building a company, I guess, in Toronto. But not uncommon at all doing business all throughout North America. The business has extended mostly into the US, right?

Rebecca Kacaba: Yeah. And because we grew during COVID, we grew remotely. So our workforce is spread across North America. We’ve got a hybrid situation so a lot of people here in Toronto head office, and a lot of people working remotely from home.

JP McAvoy: And that’s why we do so much now, remote as well. So you said before COVID. I think seeing offline, it was 2018 as you founded the company itself.

Rebecca Kacaba: That’s right. So I was working on DealMaker, I like to call it Shopify for the capital markets. So allowing people to set up online stores to raise capital digitally. That’s what we do at DealMaker. Transforming capital raising into, and always on company events. Helping people. Founders are always in need of capital for their business, that’s the biggest reason that businesses fail. And so having new, cool and revolutionary ways to raise money for your business, that’s what we’re all about here.

JP McAvoy: That’s great. So let’s get into that. What are the ways that you raise the funds for a business?

Rebecca Kacaba: So we allow people, what I like to say is to set up an online store. So the easiest one to talk about that people know is two years ago, the Green Bay Packers came to us. They are fans of the sports team, and they wanted to raise money to build their new stadium. So we set up their online store. Typically, we’re driving digital advertising to that landing page in Green Bay’s case. ESPN picks up the story, and all the fans want to come and invest. Because of course, that was their 6th time raising money from their fan base. And every time you do it, it gets easier and better, and more efficient because you have a more engaged community. So they set up their online store, and they raised 65 million in three months to go ahead and build their stadium.

JP McAvoy: That’s really unbelievable to think about. 65 million in three months. So how does that work? How do you collect that many people, that many funds?

Rebecca Kacaba: That’s the beauty of technology. Back when I was practicing law, before I started DealMaker, I really saw a pain point in the market where all of these documents to bring investors were highly negotiated. But they didn’t really need to be. And it was costing companies too much in terms of all the different fees. They had to pay to raise money. And so my Co-Founder and I said, this is an opportunity that’s right for technology. And so what we built is really an online checkout process that you can use for any kind of business to raise money digitally. And you set up a digital landing page, which is like a digital deck. And then you can do everything from TikTok ads, to Facebook ads, to different placements that will drive eyeballs to your online store. I like to say that we make it as easy to sell shares online as it is to sell shoes.

JP McAvoy: Having seen a client go through the process, they were able to raise. What are the security implications as your legal background takes you through some of the issues that I’m sure you’ve had to deal with, or make sure I’ve been addressed through the raise process?

Rebecca Kacaba: We strive to make it as easy as buying a pair of shoes, but the reality is selling shares is a lot more complex. It’s a regulated space. And so what we do is we try to make everything happen in the background, make the investors have a really easy process and ensure that the companies can use the digital checkout in a totally compliant way. And so there’s different exemptions under US securities law that allow people to raise capital digitally, and there was also very specific guidance, the marketing of what they can say and what they can’t say. And so we’ve packaged all of that up so that founders can have access to all the different things that they need in order to make a digital race successful. And a big part of that is the marketing to drive the top of the funnel, to drive the eyeballs, and getting your messaging out there. And then it’s putting people through a checkout process, collecting their payments, dealing with refunds. The technology really streamlines this whole process. Escrow used to be much more complex before we brought technology to that space. And we’re actually able to remove escrows that people could get access to their money faster so they could use the proceeds of the raise to invest more in digital marketing that has in turn over the years allowed arrays sizes to get bigger, because people have access to funding quicker, and they can deploy ad spend into their campaign. So it’s little innovations like that, that really working with our customers, we’ve been able to drive what they need to make this space grow, be easier and more beneficial for founders and entrepreneurs to raise money.

JP McAvoy: Yeah. So Rebecca, as you say customers, you’re talking founders, right? So you’re speaking with founders that are looking to raise. What does an engagement from them look like? Or I guess the other way around if they engage you, what does that actually look like?

Rebecca Kacaba: Depending on how much they’re raising under the US exemptions. If they’re raising less than 5 million, it’s about 30 to 60 days to get a campaign put together. Marketing, broker dealer, due diligence, compliance reviews, website set up, then they can launch their campaign. Those campaigns typically run from six to 10 months. And most of the capital is raised towards the end of the campaign after you’ve done a lot of testing. If you’re familiar with performance marketing, it’s a very similar strategy. You’re testing your market, your go to market, your ad words, all of those things. And once you’ve really tweaked it, then you launch the campaign in earnest. And so for less than 5 million, that’s under the Reg CF regime. That’s the typical time and life cycle. For bigger companies, they’re using Regex. So the setup process is more like three to four months, and then they can raise up to 75 million. And those campaigns are typically active for a year or even longer.

JP McAvoy: And you’re referring to the regulations that are mandating, so it’s under five. I guess you’ve seen the full range now going to the Green Bay Packers. For a typical entrepreneur, when they’re looking to do a raise, what’s the typical amount they’re looking to raise? And how does that usually go with you?

Rebecca Kacaba: For us, for people to set up their own online self hosted store, typically, they’re looking to raise over 3 million, but it really depends on the size of the community that they have. And I think we should talk about community for a second because it’s such a powerful thing in building a business today. If you look at the Taylor Swift and the Mr. Beast of the world, what are they doing really, really well that’s allowing them to grow their brand at a really fast pace is understanding their community, and then giving that community what they want. And how you do that in the world today is data. Data is the founder’s new goals. So previously before social media, you really didn’t have a lot of data about your buyer. You would design a campaign that you thought had broad appeal and pay a lot of money for TV commercials. Today with social media and using digital capital raising, you can have an immense amount of data about your community. And once you make your community investors in your business with you, you’re gonna see 54% more engagement from them. So now, you have created an army around your business who are there as beta testers, who are there to support you and buy the products if you’re a B2C company. All kinds of innovative ways that the founders who are doing digital raising are using their army of followers to build a brand that outstrips their competitors. So that’s really the innovation that we’re seeing in the market and the power of the community. We’ve got a free Communications Portal for folks if they want to start building their community and then go out to raise. Because of course, the bigger a community you start with, the more successful your raise is going to be. You can start from ground zero, it just means that you’re going to raise a smaller amount in your first time. And then people continue to stack on this form of financing, which over time will bring down their cost of capital and increase the size of their community.

JP McAvoy: It’s interesting that you discuss building that community beforehand. It’s the entrepreneurs themselves that find the investors then. How was the match made, if you will?

Rebecca Kacaba: Through digital marketing and advertising. I like to say, every founder needs to get their business funded. And often, they think they have two forms of financing. They can go to a VC or they can go to a broker dealer who can make connections for them. The reality is VCs are funding a very specific business model, and they only fund 26% of America startups. So they can also go to a broker dealer. And we work in complement with those two forms of financing. But five years from now, I want every founder across America to know that they can also raise from their community. And every founder has a community, whether it’s a mailing list about their product that they’ve already built through digital marketing, whether it’s folks on social media around them. They can put those people in a list, and they can give them the opportunity to make them an investor in their business and a real partner in the business.

JP McAvoy: So let’s turn to that, What is a typical investor? I know that’s a tough question. There’s obviously a certain criteria that needs to be met in order for them to meet regulatory requirements. But yeah, what does a typical investor look like?

Rebecca Kacaba: So the beauty of the rules that came out about 10 years ago under the Jobs Act, is that every American can be an investor. So typically on our system, we see between 40 and 60% of the investors coming through are accredited. But you can digitally advertise to everyday Americans. What the rules say is that depending on their net income, or different net worth requirements, they may only be able to invest up to $10,000. But that’s fine. And that’s plenty of money to get returned, good return on ad spend and raise significant capital.

JP McAvoy: So I guess, if I hear you, there’s no issue in advertising or looking for investors. So they’re not caught up in a new way. It’s just a question of what the investment looks like after an investor has been identified. Is that the right way to say it?

Rebecca Kacaba: Yeah. It’s a matter when you go out to digitally advertise or do it within the rules, which are very clear. You can’t go out and say, or make crazy claims that aren’t going to be true about the company. But all of that happens. It goes through a review process to make sure that you’re kept compliant, and you’re not making outlandish claims about the business because no one wants that. This isn’t NFTs or crypto.

JP McAvoy: That’s right, we’re trying to avoid some of the issues that they’re having there. To what extent are you using AI though in your program, and as you put it out to the marketplace?

Rebecca Kacaba: AI is such a huge opportunity. I’m glad you asked that because it’s really the opportunity for us to give better and better tools, and bring down the cost of capital for the folks using our system. So we’ve applied it across the system in a variety of different ways. From writing investor updates so that you can engage. Founders are busy, but you want to keep people updated on what you’re doing. Sign a new office lease, shoot a quick video and post it for them. You want to write an investor update, use the generative AI to write it for you with a couple of bullets. So background checks, reviewing accredited documentation that gets uploaded to the system all throughout the system. We’re just continuing to make things more and more efficient.

JP McAvoy: So it’s making use of AI. Can you speak to any of the specific ones that you’re using for specific AI programs that you’re using?

Rebecca Kacaba: We’re partnered with Google. So we’re very invested in the Google suite of products.

JP McAvoy: Using the Google suite of products. Great. So if somebody is listening and saying, hey, I’ve got company. I’m looking to raise a little bit of money. What’s the right way to begin interacting with you?

Rebecca Kacaba: They can reach out to us through any of our social media. Probably the best account for them to go to is dealmaker.tech/getengaged, that’s where they can get our free portal and get signed up and start communicating with their community. And then they can request a demo on the website, as well at dealmaker.tech.

JP McAvoy: What does the demo look like?

Rebecca Kacaba: They’ll meet with one of our sales reps. They’ll talk to them about their business. The first thing they’re going to do is tell you whether digital capital raising is a good fit for your business or not. And so broadly speaking, that means you have to have an interesting hook and a big total addressable market. Think of it as something that people can understand very quickly in a TikTok video. So technology companies do really well, robotics companies, consumer facing brands. A lot of energy brands actually do really well. Anything that people can really easily and quickly understand could be a total game changer. They’re usually interested enough to read on and go through the investment documents.

JP McAvoy: You mentioned Tik Tok a number of times, is that a platform that some of your founders are using to raise funds?

Rebecca Kacaba: Yep. They use all the platforms, but TikTok, I think, most people understand the quick hit of the video and the nature of it so that’s why I use it as an example.

JP McAvoy: This is fascinating. All the challenges with any of the platforms, but certainly TikTok is one that seems to present the most challenges these days. You have to be able to put it into a TikTok type of pitch. What are some of the most interesting pitches you heard, Rebecca?

Rebecca Kacaba: They come up with such interesting ones. I was looking at one this morning for one of our customers’ golf suites where they put a shark, because they had pitched to the sharks. And so they put a shark through a brass lon, so I thought that was really cool.

JP McAvoy: That is kind of neat. Now, any horror stories when you’ve looked at somebody and said, that’s probably the worst thing I’ve ever heard, and they’ve actually managed to get funded, or I guess haven’t gotten funded. Any horror stories you’ve come across in the last little while?

Rebecca Kacaba: I know how hard it is to be a founder and raise money so I’m always thrilled if we can help someone along their journey and they can continue to pursue amazing things.

JP McAvoy: Where do you see the future of this business going?

Rebecca Kacaba: I really see this as becoming a very standard form of raising capital. The ingenuity of our customers, I’m always amazed by all the different techniques they’re using to continue to interact more strongly with their community and their customer base. And I can see how they’re using that to propel the business forward. And so our mission is really to make online capital raising mainstream so that more founders can get their visions funded.

JP McAvoy: And they’re getting them funded. You mentioned shares, so the investors are actually getting shares in their founders’ companies. What does that look like?

Rebecca Kacaba: It could be any type of security they want. So they could do a safe, typically, it’s a common share. If they want one line on the cap table, they could put it into an SPV. They would happen at whatever the valuation of the company is at that time.

JP McAvoy: Who does the valuation?

Rebecca Kacaba: The founders, typically with their advisors.

JP McAvoy: And so the investors just have to like that, is there a lot of negotiation that goes on?

Rebecca Kacaba: No. It’s the same thing I’ve done in my rounds, which people like to call founder friendly capital. You set your valuation, and then you go to market and you can test it with a few folks. And you can run beta testing on it and make sure that it resonates and it makes sense. You’re not accepting a term sheet or giving a board seat to anyone, you’re actually going out to market with your own terms.

JP McAvoy: There you go. So going out on your own terms, I like that. And then how do you guys get paid? How does DealMaker get involved in that process?

Rebecca Kacaba: We take a setup fee to get the offering live, and then we charge monthly in transactional fees. The bulk of it is transactional, so we get paid when the raises do well.

JP McAvoy: Yeah, exactly. So that’s the whole point of it. If you’re able to create value, add value, then you’re going to participate in that as well. That’s great. So you’ve been at it for a few years now. What does the future of DealMaker itself look like? You’re growing it, and are you able to take it into other spaces? I guess part of it is dictated by regulation.

Rebecca Kacaba: Yeah. We’re working on some offerings into the UK, for sure. And we just continue to grow into new regions and open up new pools of capital for our founders.

JP McAvoy: And I guess that’s as far as it extends. It’s funny that you said before, we’re not crypto here. But there must surely be crypto type companies that are reaching out to you for this type of raise.

Rebecca Kacaba: Yes. Some, for sure.

JP McAvoy: I guess they have other ways as well of raising, right? Is that why they wouldn’t probably be your first customer?

Rebecca Kacaba: We saw a lot of crypto a couple of years back. There’s probably less crypto today. There’s more Gen AI, that’s more of the flavor of the day. But there’s always a lot of Tech as well.

JP McAvoy: Yeah. It seems like it’s something that would translate well for tech. And it’s nice because you sit at the forefront or watch the different cycles. You mentioned AI right now, that’s obviously been the latest hot one. What else is coming up more and more frequently?

Rebecca Kacaba: Real estate is always a category that does quite well, different sectors of tech. Health tech, robotics, Reg tech, different things like that always do typically quite well. And the other categories would be smaller, but those are the main ones.

JP McAvoy: Yeah, the main one is C. And again, interesting to be on that cycle or watching things as they evolve. You’ve been at this for a few years as well as I asked me for DealMaker itself a couple of years in looking for ways to expand in other areas. What about you personally, what else motivates you that started the business?

Rebecca Kacaba: One of the things that our team is really motivated by is that the types of founders that get funded with digital raising are far different. So less than 2% of VC funding goes to female and minority founders. Meanwhile, over 30% of digital capital goes to female and minority founders. So when I first started, we always knew that smaller VC stat, and it was what it was. But now seeing different types of founders getting their business funded and different business models, I think is going to be hugely impactful for the economy five years from now because you’ve got value based funding in a lot of sense. People are picking brands, companies and ideas that speak to them rather than a purely institutional approach. And I think the different types of companies that get funded as a result of that are going to have some fundamentally really interesting results five years from now.

JP McAvoy: It’s really empowering as well. So it’s great that you’ve been able to assist in these types of companies and all of them for that matter. Rebecca, if there’s a company listening, interested in hearing more, what’s the best way to reach you?

Rebecca Kacaba: Go to our website at dealmaker.tech. That’s .tech, nothing else, not.com. And you can fill out a form there to connect with us. You can also get access to the free community building tool.

JP McAvoy: There you go. And yeah, can you talk more? How does the free community building tool actually work?

Rebecca Kacaba: You can log in, set up your company, upload your list of contacts, and start using the Gen AI investor update writer. We’re constantly adding new templates and suggestions, and you can segment your list and start to understand who is your follower so that you can start to think about how to speak to them and raise with them.

JP McAvoy: Well, Rebecca, we appreciate having you speak to us here today. Thank you for this. I’d like to end the shows with one thing that’s worked for you or for somebody you’ve seen be successful. What’s something you’ve heard over the years that you’ve put into practice for yourself or for people that you work with to ensure that there’s greatest success for all?

Rebecca Kacaba: That’s a great question. My founder motto is, move fast and break things. Always make five bets expecting four to fail so that the one that works out, you know which one it is, and you can pour gas on the fire.

JP McAvoy: There you go. Gas on the fire. Rebecca, thanks so much for joining us here today. I look forward to the next chance we can chat on The Millionaire’s Lawyer.

Rebecca Kacaba: Thanks for having me, JP.