Two ex-Wall Streeters want to solve one of VC’s biggest problems: Warm introductions
Diadem Capital is throwing its hat into the crowded space of making funding more accessible and easy to obtain for high-growth startups. And it promises your next round will close “5x faster.”
Buoyed by a $600,000 pre-seed round led by Launch NY, the Buffalo-based fundraising platform, which touts itself as a “warm introduction network,” is building a company, investor and lending matching program in a similar vein to platforms like SeedInvest.
Diadem’s co-founders Stephanie Rieben and Joe Hammill started the company two years ago after a decade in investment banking, capital markets and trading on Wall Street. They parted ways for a bit before reuniting at Hum Capital, a venture debt funding platform that matched companies and lenders.
While at Hum, Rieben and Hammill spoke to founders who needed equity, but were too early or not in the position to give up a percentage of their business.
“That’s when we started talking about doing something about that,” CEO Rieben told TechCrunch.
Here’s what they created: The company built a low-code platform where founders sign up for capital. Those applications are vetted by Rieben and Hammill, who then personally meet with founders they want to work with. Once founders are accepted onto the platform, they are matched with institutional investors.
To be eligible, companies must be VC-backed and have at least $1 million in annual recurring revenue. On the debt side, the company will help at all levels, including bootstrapped companies, that have up to $50 million in ARR. The company has future plans to increase that to $100 million ARR, Rieben said.
Founders can view their progress in terms of who they were introduced to and the status of those relationships. Investors can come directly onto the platform, but are not able to see their deal flow until they meet with Rieben as a way to reduce friction and make sure investors will follow through on introductions.
“We check in with both the founder and investor,” Hammill said. “Founders never get real feedback because the system is not set up to do that. As an intermediary, we’re building out a place where the investor can give true honest feedback that is aggregated. For example, when three investors submit a review on the first call, that’s when the founder gets that data and individual feedback in an aggregated way.”
At a time when progress has been slow to fund underrepresented founders, Hammill defended Diadem’s VC-backed strategy, saying that while the company does want to help all founders, it isn’t helping with pitch decks or the pitch itself.
“We will not turn down someone who’s not VC-backed and who’s running an amazing business,” he said. “That said, pitching is part science and part art. We don’t shy away from that, but we prefer them to be VC-backed because that at least shows to us that they know how to pitch and close a VC.”
Meanwhile, Diadem currently has more than 100 lenders on its platform and over 800 venture capitalists using its platform. So far, over 1,500 startups have applied, and 17 founders have raised more than $60 million total. Typically, a fundraise takes four to six months on the equity side, however, Diadem has been able to reduce that time down to two to three months, Rieben said.
The pair was mum on how much revenue Diadem has brought in other than saying the company is posting revenue currently. And unlike other competitors, Rieben and Hammill are licensed bankers, so they charge a success-based fee model.
“We’re very different from competitors that have like SaaS models or a pay-to-play model where early-stage founders have to pay like $5,000 a month for six months,” Rieben said. “Many times, they get no investor introductions, or very little, or don’t get funded. We’re focused on fundability.”
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