Diadem Capital is throwing its hat into the crowded space to make funding more accessible and easy to obtain for high-growth startups. And it promises your next round will close “5x faster.”
Bolstered by a $600,000 pre-seed round led by Launch NY, the Buffalo-based crowdfunding platform, which calls itself a “warm listing network,” is creating a company, investor and loan matching program similar to platforms such as SeedInvest.
Diadem co-founders Stephanie Rieben and Joe Hammill started the firm two years ago after a decade in investment banking, capital markets and Wall Street trading. They parted ways briefly before reuniting at Hum Capital, a business debt financing platform that matched companies and lenders.
While at Hum, Rieben and Hammill spoke with founders who needed equity but were too early or unable to give up a percentage of their business.
“That’s when we started talking about doing something about it,” CEO Rieben told TechCrunch.
Here’s what they created: The company created a low-code platform where founders sign up for capital. These applications are reviewed by Rieben and Hammill, who then meet in person with the founders they want to work with. Once founders are accepted onto the platform, they are matched with institutional investors.
To be eligible, companies must be VC-backed and have at least $1 million in annual recurring revenue. On the debt side, the company will help at all levels, including bootstrapped companies that have up to $50 million in ARR. The company has future plans to grow that to $100 million ARR, Rieben said.
Founders can see their progress against who was introduced and the status of those relationships. Investors can come directly to the platform but can’t see their trade flow until they meet with Rieben as a way to reduce friction and make sure investors follow through on listings.
“We have check-ins with both the founder and the investor,” Hammill said. “Founders never get real feedback because the system isn’t set up to do that. As an intermediary, we build a place where the investor can give real honest feedback that is aggregated. For example, when three investors submit a rating on the first call, then the founder receives that data and individual feedback in an aggregated way.”
At a time when progress has been slow to fund underrepresented founders, Hammill defended Diadem’s VC-backed strategy, saying that while the company wants to help all founders, it doesn’t help with pitch decks or the pitch itself .
“We’re not going to turn down someone who’s not VC-backed and who’s running an amazing business,” he said. “So pitching is part science and part art. We don’t shy away from that, but we prefer them to be VC-backed, because that at least shows us that they know how to pitch and close a VC.”
Meanwhile, Diadem currently has more than 100 lenders on its platform and over 800 venture capitalists using its platform. So far, more than 1,500 startups have applied and 17 founders they have raised more than $60 million in total. Typically, a fundraising takes four to six months on the equity side, however, Diadem was able to cut that time down to two to three months, Rieben said.
The pair were mum on how much revenue Diadem brought in except that the company is currently releasing earnings. And unlike other competitors, Rieben and Hammill are licensed bankers, so they charge a commission model based on success.
“We’re very different from competitors who have models like SaaS or a pay-to-play model where early-stage founders have to pay about $5,000 a month for six months,” Rieben said. “A lot of times, they don’t get investor introductions, or very few, or they don’t get funding. We focus on the possibility of financing”.
