Capital marketplaces are quite the trend these days. This story traces the evolution of Axial. This is a very different marketplace from AngelList.
Sramana Mitra: Let’s start with some context and background of your personal journey. Where are you from? Where were you born, raised, and in what kind of background?
Peter Lehrman: I was born and raised in New York City. I was also educated in New York. I went off to college at the University of Virginia. I came back to New York. My timing of graduating from school was pretty bad. I graduated in 2001 from undergrad and 2008 from graduate school. When I came back from undergrad, I joined my brother who co-founded a company here in New York. I spent the first six years of my career developing that business with him and his co-founder.
Sramana Mitra: What business is that?
Peter Lehrman: It goes by the name GLG today. It’s an expert network that’s largely used by the world’s investors to make better investing decisions.
Sramana Mitra: I’m familiar with it. I think I was on it for a while. I just ran out of time, so I bailed out.
Peter Lehrman: That was my first professional experience. I went to graduate school and spent some time working with an investment firm that focused on investing in small and medium-sized bootstrapped American companies. After graduating from grad school, I went to Stanford for business school. I joined a company that was very early stage out in Silicon Valley in the summer of 2008. We had a really difficult environment. It was a company just getting off the ground. We closed the business, sadly, in the winter of 2008. Axial was born in early 2009.
Sramana Mitra: What was the premise of Axial?
Peter Lehrman: The premise of Axial is to create an online capital market for a specific set of companies that fall outside the limelight of Silicon Valley. These are larger businesses than the local business economy. It’s a category of businesses that is, at least in some circles, referred to as the middle market. In the United States, middle market represents about half of American GDP. It’s a collection of hundreds of thousands of millions of businesses that are not growing at venture scale or have the ability to generate venture outcomes. Nor, in many cases, do they aspire to be large enough to become public companies.
This is a very large market of companies. The premise of Axial was to create a capital market that’s specifically focused on the middle market and connect the middle market to one online tool that made it easy for both the lender and acquirer communities and the entrepreneur communities to find them around either a financing event or an exit event.
Sramana Mitra: Is the primary financial vehicle debt?
Peter Lehrman: About 50% of the transactions on Axial are acquisitions. In many cases, it’s an exit that the entrepreneur is looking for. About 30% of the remaining transactions are equity investments in companies that are looking for capital to grow or capital to make acquisitions. Then 20% of the transactions are debt transactions.