Entoro Group today announced that it has acquired OfferBoard, a company that removes barriers from the process of raising capital. OfferBoard isn’t Angellist nor FundersClub. It’s a platform designed to make crowd funding 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. Entoro Group, a mid-market investment bank with a specialty in energy, is acquiring OfferBoard to bring the platform in-house to support its own deals.
The reason Offerboard can do this is Title II of the JOBS Act. When Title II went into effect in late September of 2013, it was largely ignored by the tech community, at least with respect to Naval Ravikant and Co.’s Title III which brought equity crowdfunding into the everyday Valley lexicon. But to Chris Tyrrell, Title II, aka the legalization 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. But even after the laws changed, it was tough to actually raise money because more traditional industries lacked the software infrastructure to support solicitation. Though OfferBoard exists in different forms for each client and use case, it is that infrastructure in its simplest form.
James Row, managing director of 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 piece together a preferred equity deal to finance it.
“Energy is the ideal space because it has known deal flow,” asserted Row. “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 across a variety of industries. But instead of building out a software platform company, Tyrrell decided to match his market entry strategy with an equally unorthodox way out, selling to a Houston-based investment bank in a wonky transaction that also involves the merging of Clearinghouse Securities and OFSCap LLC to form the aforementioned Entoro Group that is ultimately purchasing OfferBoard.
At the time of the sale, OfferBoard had hosted an estimated 50 deals at an average of $4 million 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,” said Tyrrell. “The winners 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 behind debt 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 in capital from nine investors that largely consisted of high-net-worth individuals and family offices. Tyrrell will be joining the board of the Entoro Group but won’t be taking a formal role beyond that.