Revolutionizing private securities
After winning Steve Case investment, WealthForge looks to expand
It’s not unusual for a business to start out of a college dorm room, but most don’t need to contend with one of its co-founders preparing to go to war just as the business is starting.
Co-founders Mat Dellorso and Fred Bryant started laying the groundwork for their online private securities trading platform, WealthForge, in 2009 when both were business students at the University of Richmond. As an ROTC member, Bryant already was committed to serve four years in the Army.
After graduating in 2010, he entered the Army in preparation for a six-month tour in Afghanistan in 2011. It was virtually the same time that WealthForge was getting off the ground.
“I had limited access to email and an Afghan mobile phone” in Afghanistan, recalls Bryant, a Long Island, N.Y., native who conceived the idea for WealthForge. He won a Bronze Star for his war service.
“It made for some interesting board calls,” says Dellorso, who originally was from Boston.
Fortunately, Bryant’s father was an investor and was able to take his son’s place on the board while he was overseas. After he came back stateside, Bryant worked for WealthForge part time around his Army duties until he returned to WealthForge full time last year.
Now WealthForge has 35 employees and operates out of Paragon Office Park in Henrico County. The company has closed almost $100 million in transactions and has about 50 clients, mostly from commercial real estate development firms (and a few residential developers) but also the technology, energy, agriculture and health-care sectors. It has hosted more than $1 billion in private investment opportunities.
In early May, Bryant and Dellorso won AOL co-founder Steve Case’s Rise of the Rest business competition in Richmond. The company beat out seven other Richmond-area companies to capture a $100,000 personal equity investment from Case in a “Shark Tank”-like pitch contest held at the Gottwald Playhouse at Richmond’s CenterStage.
Each company delivered a four-minute pitch for its business model and then was questioned for three minutes by a panel of judges. They included Case, now the chairman and CEO of Revolution, a Washington, D.C.-based investment firm; Tige Savage, Revolution’s co-founder; former U.S. Chief Technology Officer Aneesh Chopra, who now is co-founder and executive vice president of Hunch Analytics in Arlington; plus Ting Xu, founder and chairman of Evergreen Enterprises; Aaron Montgomery, founder and chief operating officer of CarLotz; and Eric Edwards, chief medical officer of Kaleo, all of Richmond.
“We’re very excited by the accolade of winning the event,” says Dellorso, noting that the press they’ve received has helped raise WealthForge’s profile “with institutional and local investors” as well as potential clients. While WealthForge already had raised about $3 million in capital in previous years, Case’s investment is special because “he’s sort of an idol to me and Fred,” Dellorso says. “He took networking, the ability to communicate, from the real world to the online world with AOL.”
Case’s successful mission to get the vast majority of the nation online was “transformative,” says Dellorso, and “we’re doing something similar in a different sector. We’re getting people who complete private securities transactions in the real world to do that online. [Case’s] successes are sort of a model for Fred and I … We look forward to his help and feedback in the future.”
Dellorso refers to WealthForge as “the PayPal for processing private transactions.” WealthForge provides the technology for developers and startup companies to accept capital from investors and allows them to complete online transactions in compliance with U.S. Securities and Exchange Commission regulations without a lot of paperwork involving broker dealers and lawyers, he says.
WealthForge charges companies a base fee for access to the technology and then charges 100 basis points of the total capital raised. WealthForge also acts as a “virtual back office” and online platform for other financial firms, such as San Francisco-based Access Investors Network. It announced in late May that it will be using WealthForge’s services for its members.
In WealthForge’s Rise of the Rest pitch, Dellorso noted that the private securities business had not changed fundamentally since passage of the federal Securities Act of 1933 — until WealthForge became one of the first to take transactions online. “People can complete securities transactions with better efficiency, more transparency and better compliance online,” he says. “We give them the tools to leverage the Internet to complete their private capital raises and to invest in private securities. … In 10 years we believe almost all private securities transactions are going to happen online.”
Bryant and Dellorso “are so impressive. Their passion really shows through, and it’s really impressive what they’re building. They’re very smart; they’ve thought about every angle of this,” says Herbie Ziskend, director of the Rise of the Rest competition at Revolution, which also provides technical assistance and business advice to competition winners, such as WealthForge.
After the contest, Case said that WealthForge’s “momentum and traction” were leading factors in the panel’s decision to award the $100,000 investment to Dellorso and Bryant.
Ziskend echoes that, saying Case was pleased that “their volume was already pretty significant” and WealthForge also had proven its business model works. In particular, he says, WealthForge is primed to take advantage of equity crowdfunding by small businesses when that provision of the federal JOBS Act moves forward. (At present the SEC has delayed writing regulations to allow the practice.)
So far Case has brought his Rise of the Rest competition to 14 cities, awarding $100,000 to one local company in each location. To be considered, companies fill out extensive applications and create pitch videos. (“There’s a lot of homework before they get on the stage,” Ziskend says.) The competition aims to encourage nationwide entrepreneurship outside of traditional business centers such as New York and Silicon Valley.
Bryant and Dellorso plan to use Case’s investment to add 10 more staff members (mostly in sales and marketing) and to move into a larger office space in one of Richmond’s hot entrepreneurial districts such as Scott’s Addition or Shockoe Slip.
“We’re in growth mode,” Dellorso says.