In the past, he explained, people would go to Wall Street and apply for funds for different projects, like a railroad line from New Jersey to St. Louis or a new store. A banker would discuss all the financing options, discuss different rewards, and eventually help business owners choose 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 funding fit,’” Silverberg said. “Today, we do the opposite.” Even with ample capital in the market, writing startup checks is still a game dictated by warm introductions, cold pitches, and so many times, sheer luck the founder screwed up the right person on the right direction to The perfect time.
Silverberg said the current climate forces founders and investors to do a “crazy confrontational 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 it is trying to do with its mission, and then obtains all the relevant forms of financing waiting for them to choose the one that benefits them the most. sense, ”he said. There are no term sheets for the sake of term sheets, rather Hum Capital can be a neat way to visualize and compare different financing options for a company’s goal.
The nod to nostalgia has helped the startup gain new 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 believes symbolizes that “[Hum Capital is] a company that changes the world equally. “
At this stage, Hum Capital’s product is easy to explain: it uses artificial intelligence and data to connect companies with some of the funders available on the platform. The startup connects with a capital-hungry startup, ingests financial data from more than 100 SaaS systems, including Quickbooks, Netsuite, and Google Analytics, and then translates it to some 250 institutional investors on its platform.
It’s a navigation engine for startups unsure whether they should go for venture debt, traditional venture capital, income-sharing financing options, or others. The median transaction size is $ 6.4 million, but Hum can help founders access checks of up to $ 50 million for their businesses.
Hum is free for start-ups and investors to use for data exchange and eventual networking purposes. The startup makes money by charging a 2% market fee on the capital raised each time a deal is closed through its platform.
In theory, the founders could use Hum to meet with 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 fundraisers.
Hum’s biggest challenge is that he is not human. In business, especially in the early stages, most of the check writing comes down to an investor who believes in a person’s ambition (and perhaps their launching pad). Hum relies heavily on data as a determinant of success, and while the numbers don’t lie, it could mean ambitious early ideas run out of options.
Silverberg argued that Hum is not meant to replace chemistry, but it can work to make sure the business makes financial sense for an investor. Meetings are still important, but with Hum, he believes that a founder and investor can spend the 30 minute meeting talking about the mission and vision, and skip other business basics.
Fair rebuttal aside, Hum might be limited in the kinds of startups it finances long-term. You don’t need to find ways to fit into traditional venture capital, as most companies are not venture-based, but you will need to find a way to ensure that high-quality investors consistently use the platform for cash flow. transactions. Today, much of the investment in the platform is classified as risk 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 from outside of California and New York.
To date, the platform has helped facilitate more than $ 400 million in equity transactions through 150 fee agreements. Most of that money moved between March and now, with clients like SecurityScorecard, Evolv AI and Flaviar.
Hum Capital Increase Announced at a Time When Traditional Funding Feels Challenged: Letter you just raised money from a valuation you set yourself, Brex launched a $ 150 million risk debt business, and Clearco, an alternative to VC, raised money from VC with a valuation of more than $ 2 billion.
“[Resource allocation] as important as making the world multi-planetary, or global issues like climate change, ”said Silverberg. “… We are in the stage of selling Amazon books.”