“AI Native IB” Firm OffDeal…Real?
YC announced the launch of an “AI Native” IB firm designed for “SMB M&A” (so LMM? lol?), claiming to automate the tasks done by analysts at Wall Street firms. Snip below but what do we think? Legit or another failed finance bro grifting his subpar valuation knowledge to clueless tech people?
Sorry if I sound like a hater but the founder was a MBA associate > Vp at rbc and has the seed round is led by some no-names besides YC. I mean was dude ever even an analyst? It’s also unclear what’s actually “automated” that isn’t also being throughly checked by a human. All for innovation in an industry with many inefficiencies but claiming you have AI capable to autonomously work at the level of a Wall Street IB analyst is disingenuous at best and a possible complete fraud at worst. Also, wouldn’t these ai agents need to pass the Series 79 to be in compliance in FINRA anyway?
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“OffDeal (YC W24) has just raised $4.7M in seed funding to offer small business owners a faster and cheaper way to sell their company. OffDeal is an AI-native investment bank for small businesses. Their AI technology automates most of the grunt work typically done by analysts at larger Wall Street banks, enabling their in-house M&A advisors to focus more on strategic client interactions, leading to faster deal closures and higher sale prices. OffDeal was born from personal experience. In 2019, co-founder Ori E., a former banker, tried to buy a local cooking oil collection business. He was shocked by how painful, clunky, and inefficient the SMB M&A process was, with both sellers and buyers receiving little guidance. Inspired to change this, Ori partnered with Alston L. to build OffDeal. Over 80% of small business deals occur without an advisor, resulting in lower sale prices, broken deals, and dragged-out cycles. Most owners lack access to the M&A advice they deserve. With OffDeal, small business owners can access Wall Street-level service at a fraction of the cost. OffDeal’s mission is to empower all business owners to realize the full value of their life’s work and to promote American entrepreneurship.”
Based on the most helpful WSO content, here's what you need to know about the potential legitimacy of "AI Native IB" firms like OffDeal:
Key Points to Consider:
Automation in Investment Banking:
Claims of Full Automation:
Regulatory Compliance:
Background of Founders:
Market and Client Needs:
Conclusion:
While innovation in the M&A advisory space is necessary and welcome, the claims made by OffDeal should be approached with caution. The extent of their AI's capabilities, regulatory compliance, and the founders' experience are critical factors to scrutinize. The skepticism expressed in the WSO threads reflects a broader industry sentiment that, while automation can enhance efficiency, it cannot fully replace the nuanced and strategic roles played by human analysts.
For further insights, you might want to explore more discussions on WSO about automation in investment banking and the experiences of other users with similar firms.
Sources: Google partners with Goldman Sachs in automating Investment Banking, https://www.wallstreetoasis.com/forum/investment-banking/investment-banking-is-being-physically-annihlated?customgpt=1, Tech, which is becoming increasingly sophisticated, will replace investment bankers, https://www.wallstreetoasis.com/forum/real-estate/your-worst-work-experiences?customgpt=1, Technological advancements in IB
I suppose it could replace many business brokers, who aren’t really running M&A processes. If it can undercut their fees, it will probably steal share.
If their target market is small businesses then they can cut corners and automate some parts and the client would never know the difference. No one is gonna do EB/BB quality work for a 500k local plumbing company, so I guess this niche makes some sense.
Nobody is doing MM or LMM boutique quality at the broker level. All these brokers do is source sellers, post deal opportunities and automated email blast.
smaller companies could use help building financials
Does the market make sense for vc backed company though? That market is tiny, seems like a waste of vc dollars if you do that TAM analysis
>40% of US GDP and 60m workforce with multi-billion payroll… granted, a lot of this is micro cap but the same goes for Europe — small numbers also add up. Taking a deal size almost nobody would touch — say 10-15m EV and below — there’s plenty out there fitting the category and some marketplaces benefiting from this despite an entire lack of any service despite a shitty classifieds platform.
Ultimately, perhaps it’s even a value-add for society, to somewhat professionalize this micro cap process a little bit.
Sounds like it struck a nerve with OP but despite a first chuckle, I think it’s fairly obvious to everyone (incl. the founders) that this is a different league, or even different sports altogether, if compared to EB/BB/MM/LMM/B4… nonetheless, they might be successful in their own way with this…
Old thread but saw a new article in FT about the company: https://www.ft.com/content/9daf5c7e-e301-4b7d-809a-ff9fb336bdbc
Also to answer the OP, it looks like the founder actually started as an analyst and got an MBA after his IB stint.
The FT article is pretty silly and reads more like paid advertising than real journalism.
$2M bonus for junior staff doesn't make any sense in conjunction with $12M equity raise (for which I'm sure a decent chunk of equity was given away). If they're really making enough $ to pay juniors $2M they wouldn't need to raise any capital (or could raise it cheaply from the junior employees via SBC).
Also, if their systems/tech/AI are good enough that a single person can run $5M+ in fees as an associate then the actual human being is very low value-add and could be paid far less.
That was my same thought on that $2mm payout. The math isn't mathing. If they're that profitable then why sell any equity at all. I do think what they have on paper is an interesting approach in that LMM/micro space but I'd like to see more track record
That being said, I buy the story of AI automating a lot of grunt work. My question is more on this specific implementation with these guys.
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