🌱 Dealwise: an AI powered investment bank for startups

We’re Jason and Ayan from the W23 batch of YC, and we’re building Dealwise, an AI powered investment bank for startups

TL;DR:

Dealwise helps founders sell their startup. We use AI to automate the back office work associated with dealmaking. This let us serve startups too small for traditional investment banks, while running an accelerated process that gets founders offers in half the time.

Contact me at jason@godealwise.com or visit godealwise.com to learn more!

Background

Before being founders, Ayan and I were each other’s PMs and software engineers at Robinhood. Around August 2023, we noticed a lot of interest in M&A activity from our founder friends, including one batchmate who we advised informally in the sale of his startup. We started learning about what it takes to get deals done, and that’s when we realized there was a massive gap in advisory services for founders who want to step off the venture path (or were never on it in the first place) that existing service providers don’t fill.

The problem

Selling a company is hard. In fact, over 90% of deals fall apart before the transaction closes! Acquisitions are like babies - each one is a miracle, but somehow they still happen all the time. This difficulty is why the investment banking industry rakes in over $300bn per year.

Given the high failure rates, founders must run an efficient process. They can’t afford to waste months or even years on a deal that never closes.

Unfortunately, if you’re the founder of a startup worth less than $50M, no reputable investment bank is going to work with you, as they won’t generate enough in fees for it to be worth their time.

This leaves founders with just a few options that, frankly, all suck.

Traditional M&A Advisors

There are many M&A advisors (sometimes called business brokers) in the lower end of the market that work with small businesses. However, selling a small company is just as much work as selling a much bigger one, so successful advisors tend to move upmarket. That means most advisors working with startups are either bad at their job, or very new and inexperienced.

Due to the high failure rates in M&A, advisors sign as many clients as possible and lock them in to exclusivity agreements that ensure they get paid a fee if any client sells in the next 2 years, regardless of whether the advisor was involved. This is not an extreme case, these predatory agreements are the norm for M&A advisory firms.

Plus, traditional M&A advisors almost always come from a business background - few understand the software industry or have networks that are better than the founders they work with.

Marketplaces

Marketplaces like Flippa or Acquire.com are great for four, five and six figure transactions paid for in cash by individuals, but serious corporate and institutional buyers avoid these platforms.

For transactions that are seven figures and up, buyers usually need some combination of equity and/or debt financing, which means the bar is much higher for diligence. It also means founders expect a lot more support through the process than what they get listing on a public marketplace.

DIY

Given the alternatives, it’s no wonder most founders with between $1mm and $5mm revenue opt to DIY their acquisition process.

Unfortunately we see many founders who’ve gotten stuck in a viscous cycle of: spend time chasing buyers → get distracted → growth declines → selling gets harder → spend even more time chasing buyers → growth declines more → ultimately shut down.

The median founder sells 0 companies in their lifetime, so it makes no sense to become a M&A expert when you have a business to run.

The solution

We started Dealwise in December 2023 to help startup founders get acquired. We use AI to automate the back office work, which means we get healthy margins on transactions that are too small for investment banks. More importantly, it allows us to run a process in just 3 months compared to the typical 6-12 months process for M&A advisors and investment banks. As a founder, it means you can get feedback sooner instead of wasting a year with an M&A advisor who’s stringing you along but not doing much work for you behind the scenes.

We’re new, but our track record is phenomenal. Traditional M&A advisors typically take a minimum of 6 months to close a deal, and 12 months or more if it’s their first deal. We went from launch → 7 figure deal closed in just 3 months, with several more under offer. Our record for clients was just 4 weeks from the start of our engagement to first offer submitted.

As we scale, we’ll apply our experience building LLM tooling at our previous startup to continue automating tasks like buyer prospecting, thesis generation, NDA signing, and data room creation so we can focus our time on supporting founders through their acquisition journey.

Why is this important?

Patrick and John Collison sold a little known startup called Auctomatic in 2008 before founding Stripe. Sam Altman’s first company, Loopt, raised $30M from investors only to sell for a “modest” $40M. Before Uber, Travis Kalanick spent six years trying to make a startup called Red Swoosh work, at one point moving back in with his parents, before finally selling it in 2007. And Socialnet was considered a failure by its founder, Reid Hoffman, after being acquired for a “modest sum” in 2002.

For startups that struggle to hit escape velocity, sometimes the best option is to sell it so the founders can move on to greener pastures.

But selling a startup is a difficult, and often lonely process. We want to be there for founders when their VCs have stopped replying.

Our ask

If you know a founder who are considering an exit, email me at jason@godealwise.com. We keep conversations 100% confidential and I’ll be more than happy to chat even if all they’re looking for is some advice and insights on the market.

The founders who will best fit for Dealwise have a few things in common:

• They sell software, or software-enabled services
• They have at least $1mm in ARR
• They are profitable or have a clear path to profitability
• They are motivated - if they had to choose between an exit and raising a round, they’d choose to exit
• They already have buyer interest and are looking to run a more competitive process

Learn more on our website, or reach me at jason@godealwise.com if you want to chat about acquiring or exiting a startup.