Less than 6 months after launching our Intelligent Capital Market (ICM), an AI-driven funding platform offering private companies a new way to raise non-dilutive financing, we are excited to announce our expansion into supporting equity financing. With our newly-secured broker/dealer license, Hum can now advise companies on equity raises, advancing our mission to become the go-to destination for great companies to connect with the right capital.
Today, most investors offer a handful of financial products. To evaluate which options are available to them, companies must take tons of meetings. The process feels like booking travel in the 1980s when you had to call airlines one at a time. This is counter-productive to the efficient allocation and use of capital because it artificially limits a company’s options — and leads entrepreneurs to make decisions based on incomplete information.
We’ve compared Hum to a Kayak.com-like experience, and with the addition of equity this has never been more true. Just like you can plan a full vacation through Kayak based on all the hotel, flight and rental car options available, Hum gives companies the same choice when it comes to fundraising. And now, companies have the flexibility to explore raising debt or equity capital––or some of both––to optimize their total cost of capital, dilution and risk profile.
Two Sides of the Same Coin
The way that the market bifurcates equity vs. debt is flawed––and this viewpoint inherently hinders how companies view their options. Healthy companies, including almost all of the S&P 500, thoughtfully blend their use of debt and equity. By separating the equity and debt financing processes, most private companies end up overweight in one or the other. Overweighting equity means excessive dilution, and often tens of millions of dollars of foregone wealth for successful entrepreneurs. Similarly, overweighting debt can mean the risk of bankruptcy.
With the private markets at more than $7 trillion of Assets Under Management (AUM), continuing to operate in a less efficient way imposes meaningful costs to the economy overall. This can be solved by giving companies the tools to consider both debt and equity options in concert — which Hum now offers via its support for equity, debt and everything in between.
Another way of looking at this issue is: debt and equity are both money––no matter how someone gives you $10, they’re still giving you $10. Ironically, in our capacity as consumers we intelligently weigh debt and equity based on our particular needs and circumstances. As consumers, we understand debt in the capacity of mortgages, credit cards, and car loans. When we borrow money to buy a home, we don’t expect the bank to take 80% of our home’s future value––nor would we view such a decision as being in our best interest in the long term.
What we’re doing at Hum is giving entrepreneurs the same opportunity to make the best choice for their growing businesses. It doesn’t really matter to us if they choose debt or equity, what matters is that they are empowered with the information and access to make that choice.
Helping Great Companies Anywhere Connect with the Right Capital
Here at Hum, we are driven to bring the efficiency and transparency of public market transactions to the private capital markets. Why? The typical relationship between investor and company is asymmetrical.
Investors evaluate investments on a daily basis while companies raise capital once every 12-24 months. No matter how thoughtful a company is during a financing process, the work of building and running a company fundamentally creates asymmetry. When you add in the fact that an entrepreneur’s network (vs. tangible business progress) limits her fundraising options, companies are at a severe disadvantage when raising capital.
Having worked with thousands of companies on Hum’s Intelligent Capital Market to evaluate capital from banks, insurers, and top-tier equity investors like Tiger Global and T Rowe Price, we see this information asymmetry every day. By expanding our marketplace services at Hum to include equity raises, we’re taking an important step forward toward putting companies and investors on a more equal footing.
Up until now, we’ve shown the world that Hum is a funding platform with advanced analytics and the ability to match companies with interested investors. But until now, we haven’t been able to tap into our full potential for companies and investors. With the ability to offer companies access to both debt and equity options, we’re able to attract a more diverse pool of investors and capital to the platform, which translates into more options for companies looking to fundraise, regardless of where they are located or what investor connections they happen to have.
Since the first close of our Series A in August, the number of companies on the ICM has reached more than 2,400, with representation from 47 of the 50 states. The Midwest and South have been historically underinvested, and so we’re encouraged to see that nearly 30% of the companies on Hum’s ICM are located in these regions. Good companies can exist anywhere and whether they’re actively planning a fundraise or want access to insights that reveal how investors will view their business, Hum is here to help them meet their potential.
Private Market Investors Believe the Future of Financing is Data-Driven
But the opportunity to make private investing more efficient is not just for the benefit of companies seeking fundraising — it’s also for some really smart institutional investors that see where the future of private investing is headed.
Great investors take advantage of changing market trends. Whether Barclays creating the ETF or Rentec creating the quant fund, similar firms will be built upon the same revolution in private market data that are driving Hum’s business. We’re proud to have many of these folks already engaged via Hum’s platform — both forward-thinking balance-sheet institutions, as well as new investment firms created to take advantage of these trends. Today I’m excited to share that we have also secured new strategic investment from Cowen and Company and Invesco Private Capital, two esteemed leaders in the capital markets. With their participation we have completed the second close of our Series A at $21 million.
We also welcome Larry Wieseneck, Co-President of Cowen and Company, to our board and look forward to working together to bring data-driven insights and efficiencies to private investments.
Ready to explore your fundraising options? Contact us to learn more about the ICM and the future of fundraising.