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Online networks

Advisors, Private Equity

How Online Networks Are Transforming Every Sector

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Online platforms are a fact of life across many sectors of the American economy. It started with e-commerce during the first Internet boom (Amazon, founded in 1994). Following the crash of 2000, the Web 2.0 era saw the launch of internet-based networks, marketplaces, and other SaaS-powered platforms in sectors as diverse as dating (Eharmony, founded 2000), real estate (Zillow, founded 2005), handmade goods (Etsy, founded 2005), healthcare (Zocdoc, founded 2007), hospitality (AirBnB, founded 2008), the labor market (TaskRabbit, founded 2008), transportation (Uber, founded 2009), and the list goes on.

While there are subtle differences in how each of these businesses harnesses the power of the web to make money and bring consumers, products, and transactions online (this is a nice discussion on the differences in online business models), one thing unites them all: they are changing the way business is done in the 21st century.

Though it’s taken a while, financial markets, and more specifically, the capital markets are not immune to the evolution inspired by the ability to identify products, services, and people and transact online. Crowdfunding sites such as Kickstarter and Indiegogo have financed numerous projects and even some early stage startups. Fundera aims to build a marketplace where small businesses can find loans. Online brokerages like E*TRADE have enabled everyday investors to better access the public capital markets from the comfort of their own homes. Axial was founded as an online network where middle market businesses could make the right connections to help raise capital (equity and/or debt), be sold, or find potential acquisitions.

From our vantage point a little more than halfway into 2015, the power that online networks have had on almost every aspect of the economy is well proven. However, for all of these companies, at some point in time, there was doubt that any of their respective sectors could truly be brought online. Amazon was nearly brought to its knees during the 2000 crash; its stock price cratered from $107 in December 1999 to $6 in September 2001 and the company had to deny persistent bankruptcy rumors. Famously successful venture capitalist Chris Sacca passed on AirBnB stating “someone’s going to get raped or murdered, the blood will be on your hands, there’s no way this can succeed” (18:30 on Episode 533 of This American Life). Some of Kickstarter’s earliest big projects delivered less than stellar results. Rarely a week goes by without new negative press coverage for Uber.

But despite the doubts, online networks and marketplaces have thrived in recent years. Amazon’s market cap stands north of $200B, AirBnB’s recent funding round was for $500M at a valuation of over $10B, Uber appears headed for a massive IPO, projects begun on Kickstarter are turning into venture backed businesses, and online dating has lost much of its early stigma.

How have these businesses managed to thrive despite all the doubts and risks? One major reason is that they have deliberately and systematically highlighted the positive connections and successful transactions completed on their networks. EHarmony enthusiastically features couples who met on their platform. Uber, Etsy, Zocdoc, AirBnB, and TaskRabbit all make use of ratings system that showcases both the volume of connections on their platforms, and their overall quality. Kickstarter spotlights its successfully funded projects.

In that vein, we at Axial are committed to more fully sharing the success found by capital markets professionals and private company CEOs on our network. We will continue to share success stories. Recently, we launched our Tombstones Page, where we feature a selection of some of the recently closed deals where the initial connection was made on Axial. In the last 90 days, over 2000 digital NDAs have been signed and, at a very conservative estimate, over $500M of total deal volume has gone into closing on Axial. The below charts show the rate of adoption of our digital NDA product and the number of deals initiated on Axial that have gone under LOI (one step closer to closing).

Number of NDAs Signed Per Day

Deals Under LOI

Along with other traditionally offline markets, the capital markets are moving online. We at Axial are excited to be part of that movement and look forward to celebrating the success found online by our members.

Learn More About Joining Axial

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