Connecting to Capital During Covid-19
For all of the suffering 2020 brought to Toronto, Canada and the world, crises also catalyze adaptation and innovation for good.
Leading into 2020, PWC Canada reports that Canadian VC-backed companies raised $4.1B USD in 2019. Total funding was up 16% over 469 deals despite deal activity being down 11%. 2019 was a record year leading up to 2020 and Covid-19.
Businesses are now challenged like never before; inability to meet face to face, manufacturing and supply chain interruptions, unprecedented health and welfare concerns for employees, events and gatherings outlawed in many countries and in some (fortunate) cases, managing stratospheric growth of health care and technology-based businesses.
2020 also accelerated the evolution of societal norms.
We no longer shake hands; a standard etiquette with origins in medieval times intended to establish goodwill by proving that one’s right hand did not bear a weapon.
We are comfortable using technology to connect where travel, financial costs and time were loss-leaders accepted as requirements of sales prospecting, customer and partnership interaction.
We were also forced to innovate; investing significantly in opportunities created by the vast product and service gaps expected in a post-pandemic world.
And this is where businesses are changing the world. With vision, persistence, and capital.
Founders and leaders adapted. Every aspect of business in every industry has seen innovation and opportunity. However, the greatest constraint to the rapid development and deployment of these innovative solutions is the capital required to produce and scale these evolutionary advancements.
Powerful technology to the rescue.
Fundraising and capitalization requires identification of investors, pitching, negotiations and due diligence in advance of all transactions. The vast majority of transactions fall apart during due diligence; where the business fundamentals are tested against the criteria investors set for their desired returns, timing and risk tolerances.
Simply put, a company will invest its limited time and money to identify investors, pitch investors, negotiate with investors, only to see investors walk away when a mismatch of goals and fundamentals is identified at the end of the due diligence process.
This is a tragic waste of time and resources for both companies and investors.
Starting with the end in mind, a unique technology platform was developed that enabled both companies and investors to use due diligence to filter their lead flow, protecting themselves from spending their limited time and money wining and dining, pitching and negotiating, writing legal LOI’s and MOU’s when a fundamental gap existed that would derail the deal in its final stages.
The founders of Sploda.com experienced first-hand the challenges of raising and investing capital.
When trying to raise capital, their greatest challenge was getting connected to real investors. If any introductions could be secured, the person making the introductions demanded punishing finder’s fees simply for connecting the two parties. Paying fees of 5% – 8% (or more!) of a total investment to people for making introductions would have been crazy if there were other options.
Similarly, if they hired a fundraising service, they had to sign an exclusive agreement and weren’t allowed to work with any other fundraising services or networks. It was an expensive, inefficient and limiting process being forced on companies who were already financially at risk.
Another paralyzing step in the fundraising process was the need for a company to manage the due diligence rooms for every investor reviewing their data. This meant that each month as new data arrived, every single investor had to be updated separately. The fundraising model was critically flawed.
For investors, the number of hours being wasted reviewing pitch decks and meeting with inappropriate companies was staggering. Unbelievably inefficient for people whose time truly represents money.
In Canada, Toronto was the top city for venture capital investment which also means that by volume, Toronto wasted the most time and money. Something was required to shake some common sense into an archaic process.
One round of diligence to rule them all.
Sploda.com became the solution. Operating in twenty-eight countries, Sploda connects companies of all stages (pre-revenue to profitable), public and private, in all industries to verified investors around the world.
When a company makes an update to its diligence data in Sploda.com, the update is automatically shared with all matched and future investors.
In the fundraising industry, Sploda.com is a massively disruptive technology platform. The fundraising model is filled with toxic practices like exorbitant finder’s fees, exclusive contracts limiting access to resources, and predatory transaction fees, Sploda.com connects companies to investors for a trivial monthly fee ($29.99 USD), and investors to companies for free.
Sploda.com is the only financial services network to automate the due diligence process. Their technology enables powerful filtering capabilities that significantly decrease the risk of a transaction failing in the due diligence stage of negotiations.
Investors spend five minutes selecting the criteria that they seek in an investment. Companies spend thirty minutes answering a due diligence questionnaire. Sploda’s matching algorithms automatically isolate the key data and connect the two parties when critical alignment is met.
No finder’s fee. No contracts. No exclusive service agreement.
The record 175 funding deals ($1.3B+) consummated in Toronto are the result of millions of people-hours and dollars invested. Deal volume however was not a record; five fewer invests were closed than in 2018.
A decrease in deal volume should be a surprise considering technologies now available to improve processes and procedures for identifying and pre-qualifying lead flow. With better lead flow, the same number of people should close a greater number of deals, not fewer. Toronto should have set a record in deal volume as well.
For all the tragic outcomes resulting from the COVID-19 pandemic, many positive innovations have emerged. New technologies have been developed, creating efficiencies where archaic practices remained in place. Corporate cultures leapt forward, forced to accept new norms for communication and remote project management. Perhaps most importantly, new technologies have been welcomed to disrupt established business practices and bring new and improved tools and processes to the twenty-first century.
Sploda.com is just such a technology.
Companies and investors still rely on proprietary processes to vet each other, negotiate terms and build successful ventures together. However, both companies and investors will waste less time cultivating deals that are likely to fail.
Sploda.com sends high-value lead flow to investors while enabling companies to efficiently and inexpensively connect with verified investors. Visit www.sploda.com to learn more.