Building a Capital Marketplace for Mid-Market Businesses: Axial CEO Peter Lehrman (Part 6)

Sramana Mitra: How do you acquire members for your community? What is the marketing strategy? How do people find out about you?

Peter Lehrman: We have a couple of different strategies for the different markets that we’re pursuing. We pursue sources of capital and the investment banking and business brokerage community. Beginning in 2014, we began to market directly to entrepreneurs and CEOs in each of these industries.

Sramana Mitra: When you say you’re marketing directly to them, what kind of customer acquisition strategies are you using?

Peter Lehrman: I was just laying out the three different categories because our strategies are different in each of those categories. In the investor category, one of the most effective acquisition techniques is events-based marketing. We both attend a lot of industry events and we also created our own event calendar throughout the year. We have, at least, one or two events each month and we have a large annual conference. That’s a very important acquisition channel for us in the investment community. We invite our existing customers to each bring an invited guest. We acquire through referral in the investor community.

In the business brokerage and investment banking community, we’ve got a couple of different activities beyond just the event marketing. We do a significant amount of content marketing in which we take the activities that are occurring on Axial, anonymize all of the activities, and write up research reports on the activity that’s occurring in different industries and different market and make that available for free through content marketing strategy. In the CEO and entrepreneur market, that’s the largest addressable market in terms of the number of people. We pursue some of the more consumer-oriented techniques there. PR is definitely an important part of our strategy for reaching entrepreneurs and CEOs. We have also engaged in significant partnerships.

We’re partners to Vistage, which is a peer learning community for middle-market CEOs. We power portions of Vistage’s executive curriculum that relates to accessing capital and selling companies. We provide a lot of content and curriculum services to help them educate their CEO membership on how to prepare to raise money or sell your company. That’s a key partnership for us. Actually, we built some of our own tools. One of the tools that we’ve made available to CEOs is a free five-step discounted cash flow valuation model, which they can download for free or use online. It gives them an approximate value for their business without going through any of the trouble of engaging with valuation firms. We offer it 100% for free. In the different markets that we’re pursuing, we have different methods that work. We also have a lot of email marketing and we have a direct sales force inside the company that’s responding to a lot of the inbound inquiries that we get.

Sramana Mitra: In terms of strategic maneuvers, aside from entering these different verticals on a regular clip, what other strategic pieces have you executed on over the last five years?

Peter Lehrman: I think there’s two, at least, that I can think of. The first is, we don’t charge success fees. We don’t think that’s the right approach to building a neutral platform on the Internet to connect CEOs with capital. It’s complicated when you charge success fees. It gets messy. I think the conflicts of interest can present themselves all over the place. That’s a very important decision that was made very early on. A lot of our peers operating crowdfunding platforms have chosen to use that form of monetization. In some cases, they’ve been able to make it work.

For us, it’s been very important to be able to go to market with a totally neutral platform that has a totally transparent pricing framework behind it. Probably the second most important strategic maneuver is not declaring war on the intermediaries. When I say intermediaries, I mean the business brokers and investment bankers. I think that there’s a tremendous temptation among a lot of technology entrepreneurs to disrupt for disruption’s sake and cut people out. In some cases, it makes a lot of sense. I don’t think it makes sense in this case. The reason is when you sell your company as an entrepreneur, you usually have very little experience doing that. It’s usually the most important financial decision you’ll make.

While I think that some business brokers and investment bankers are much better and are more highly-skilled than others. Trying to eliminate the profession is a real disservice in the end to the CEOs because I don’t think that most CEOs have either the time or expertise to build their business by themselves without professional help. The third is in 2014, we took a really careful look at the business and how we were going to market. We made the intentional choice to begin directly marketing to CEOs and creating a seat at the table on Axial for the CEOs themselves. Starting 2009 and all the way until 2014, Axial was the platform for the brokers and the source of capital. We did not really create a seat at the table for them in an explicit way until 2014. I think that allowing them to join Axial and to be able to engage on Axial, and not have it only be a platform for the brokers and the capital providers, has created a much richer network on Axial with way more possibilities and opportunities for our members to connect and interact with one another.

This segment is part 6 in the series : Building a Capital Marketplace for Mid-Market Businesses: Axial CEO Peter Lehrman
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