Fundology Offers New Platform For Private Investment

by Susan Wright

Social networking has seen impressive growth over the past decade, with popular sites like MySpace paving the way for other wildly successful sites like Facebook, Twitter, Google Plus and a host of others. But investors and business owners looking to be properly connected have not yet been able to fully capitalize on the rise of these networking platforms.

In my quest to find new companies in this space, I came across Fundology, a company which aims to dramatically reduce the time and cost of the transactions by  bridging investors and business owners together on its investment network platform. Fundology allows users to create and share informative deal profiles and allows users to search deals in their network.

I recently sat down with Kison Patel, President of Fundology, to learn more about his past, how the company was started,  how it operates, and where it is headed in the future.

Tell us about yourself first. What is your management style? Where did you go to school and work in the past?

I come from an M&A background. I have been practicing for seven years. As far as my management style, prefer small teams. I really try to build a very open relationship with members of my team and keep them very engaged in projects. I make sure everyone feels like they are a part of the company. I facilitate a lot of robust dialogue between the members of the team and I create an environment where everyone is comfortable contributing ideas.

I went to the University of Nebraska in Lincoln. I transferred to the University of Illinois at Chicago where I studied Management Information Systems. I ended up getting a real estate broker’s license. I was practicing with Baird & Warner in residential real estate. I worked there for six months and didn’t sell a single house and kind of left with my head down in the industry.

I always had a passion for business. I started working with a business brokerage firm where I started gaining traction selling small convenience stores and Subway franchises. It was about one year after working with that firm that I decided to start my own practice. I really wanted to focus on a specific niche versus the firm I was working with who were more generalists. For a year and a half I was just working with fuel stations. Then I picked up an interest in hospitality, growing up in that industry, and for five years I was doing brokerage for hotels. I started out with  small deals worth $1 million or less, then settled in the lower middle market between $10 and $30 million hotel transactions.

At that time I had a partner in my company and we started to do capital-raising and M&A for small community banks. It was in 2007 when we had a pretty rough year, and I downsized, shifted focus and started developing prototypes of different tech platforms.

Tell us how your company started and when. Who was involved and what did each person do?

The idea for Fundology came from my experience using some of these first-generation platforms to market deals. It was when we started selling banks that we realized the insufficiency of these platforms. I listed on merger network and Biz Buy Sell. Instead of getting one to three phone calls a day, I was getting ten to fifteen phone calls a day, and it was mostly consumers wondering if their bank was for sale,  Joe Schmo at home in his boxers eating potato chips, or drug-dealers. There was a lot of noise coming in with the leads that we generated from these particular listings.

I recognized that there were two main problems. First, we didn’t get any transparency in terms of who was calling. You had to take the phone call and spend the time whether you wanted to or not. The second problem was that we didn’t have control over the distribution of our bank deal profile. It should have been targeted to investors that expressed interest investing in banks. From these inefficiencies stemmed the idea to develop a platform that was more efficient.

Fundology was formed in January 2012. We currently have six members that make up our founding team. Ralph, our lead developer, was our first hire. He started setting up the framework for our project. He also helped source our second developer, Nathaniel, who came from a university system administrator background. He manages the security and servers for Fundology. Jeanette is our quality assurance analyst and really maintains that our code is functioning properly. Paola has been with our company since inception. She was managing another business for me that I had, and she’s been involved through the planning and recruiting process for developers. Currently she helps manage the production of our site. Paola produces our newsletter that goes out to over 10,000 subscribers and features different CEO’s of up-and-coming companies every week. Rick is our Director of Strategy. He came from an agency background and really develops a lot of the skill-sets that he learned working with larger corporations. Rick puts forward best practices and has made Fundology a user-friendly and robust platform.

Tell us an interesting story about your business. Were there any “wow” moments? Anything funny or unusual?

Well, we recently announced a name change, and I think the story leading up to it is pretty interesting. We originally developed our product under the brand FIEXE, it’s a mesh between “finance” and “execution” . It was a name that I was proud of and I was excited to use it for my brand.

We attended a lot of networking events; we have our name tags on and people would always mispronounce the name. I had a conversation with Melissa, who writes business books. I told her we were launching a newsletter called Fundology, and she suggested that we use that name for our company. After hearing the name Fundology, she had an idea of what our business was, and it was catchy and memorable.

I walked away from that event and sat with my team in a marketing meeting and just kind of mentioned the suggestion Melissa made. We discussed it and deliberated for about an hour or so and made the decision right then and there that we were going to rebrand. Within two weeks we did a full rebrand of our site, had a press release sent out, and completely changed our product name to Fundology. I couldn’t completely get rid of it; we still retain FIEXE as our corporate name.

What is your role in the company now?

I’m currently the president of Fundology. I manage daily operations and spend a lot of time creating marketing strategies, development strategies and building strategic relationships to create partnerships that can help move our company forward.

What does your company sell and how does it make money?

Fundology is a deal discovery site that allows users to quickly find relevant investment opportunities and also market targeted deals.  When a user posts a deal, they choose exactly who it is shared with. Fundology also helps users strengthen and grow their existing network. So, for example, if you’re a start-up company, you’d ideally want to build a network with Angel and VC investors. If you’re a middle-market company, you might look to build or strengthen your relationship with private equity firms and middle market lenders. We make this all possible in a robust and intuitive platform.

We are currently in beta, so our site is free. When Version 2 launches mid-year, we will offer our services as a subscription.

Which companies do you consider to be competitors?

As far as M&A deals, Axial Market and Deal Market. In terms of private securities, Second Market and Shares Post.

We take more of a networking approach where you’re distributing deals through a network. It’s more targeted actually. You’re really targeting people that are interested in the type of deal that you’re posting versus just kind of mass-estimate marketing to the whole user base.

Also for private securities, some of the competitor products could be a second market and shares post where they offer investment opportunities on private securities. Again, our platform we really focus on the whole market networking aspect and keeping these deals very targeted and who you’re dealing with. I think that’s kind of the thing that really has us differentiated from the competitor products out there.

What makes your products and services better than competitors’ offerings?

There’re quite a few deal platforms that have a similar workflow but our approach is quite different. We take more of a networking approach. Users distribute deals through their network so it’s targeted to people that are actually interested in the type of deal that you’re posting versus mass-marketing your deal to the whole user-base and then filtering through irrelevant responses. We really provide a user-focused experience.

Where do you see the company in five years in terms of revenue and profitability?

$20 to $50 million annual revenues with 45% profit margin.

How big do you think the market in which you operate will be in terms of total revenue in 2015? 2020?

$100 billion internationally.  The recent Jobs Act will increase our domestic market for deal platforms dramatically.

What forms of marketing do you use to attract clients?

One unique approach is our newsletter. Instead of having a typical company blog where we boast about new features and push people to sign up, we feature the members of our site. We conduct a 5-15 minute interview with up-and-coming companies that may be looking to raise capital. We also feature various service providers and capital providers. Instead of focusing on our company, we showcase our users to give them exposure. I feel like that’s something that adds value and really gives an idea to the type of people you can connect with on Fundology. That’s been a really good attraction for us. We have over 10,000 subscribers to our newsletter and the subscriber base is continually growing.

We use LinkedIn ads and Google AdWords, as well.

What are the biggest growth catalysts for Fundology right now? Tell us about any patents or other IP.

I would say innovation. We’re constantly taking feedback from our customers and really focusing on their problems areas and how we can refine our product to solve their problems. We look at why they’re unsatisfied with the current “solutions” that they’re using. I think that’s been our biggest strength and it’s really helped us to move forward in developing new features that are going to nurture the experience for our users.

Have you faced any regulatory hurdles, or anticipate any in the future? Explain.

A lot of our users are Investment Advisors and Broker Dealers and are regulated by the FCC and FINRA. We’ve actually incorporated archive and export features to help them be compliant in the case of an audit. They can easily export all communication out of the site.

We know regulations change, for example, the Jobs Act will lift the ban on general solicitation. I know this will greatly impact our industry in multiple ways so we have to take it into consideration in terms of how our platform will be used.

Is there any announcement you’d like to make?

We are constantly improving the user experience and I’m very excited about the upcoming developments that we have incorporated into Version 2. If you sign up for our site now (for free), you will receive version 2 for free for six months.