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Back to blog March 13, 2018 No Comments Author: Andy Jones

Interview – Nate Nead with

I recently spoke with Nate Nead with Below are some excerpts from our conversation.

About Your Firm… is a technology-enabled investment bank. We increase the quantity and quality of deal flow by using web-based tools and marketing. We work on lower middle market deals with enterprise values between $10 – $50 million–sometimes less for a particularly interesting deal.

What do you mean by “tech-enabled”?

In one sense, we are tech-enabled as an investment bank for our own internal marketing purposes. On the other hand, we work with investment banks to get broader distribution for sell-side mandates.

Investment banking, especially deal sourcing, is very much relationship driven. When investment bankers work on a deal, they become so focused on the transaction, they are not nurturing their pipeline. As the deal closes, they immediately go back to hunting mode for new opportunities. We employ technology to ensure we have a good, steady deal origination platform. We may not always have the best quality of deals, but we have the quantity. You can always find the diamonds in the rough when you have the quantity. “If you get 20 potential deals in a day, 21 of them are garbage so you have to kiss a lot of frogs.”

In another sense, the software we have been building (not yet launched) grew out of a personal need we saw in the market for an integrated virtual data room, CRM system, automated marketing outreach and investor-matching tools… and have it all tied together. We also use this as a tool to source more deals and opportunities for our firm. If we have another boutique shop post a deal to the platform, we might bring a buyer to the deal and take a small buy-side fee.

Trends in Services used by M&A Firms

The market is shifting but technology adoption has been slow. You would be surprised how many bankers use Excel, Outlook and Word to manage their deal flow, contacts and deal processes.

Over the next 10 years, bankers might use various tools to do certain jobs. Over the longer-term, there will be a demand for an all-in-one solution. The big need over the next decade will be on the data side. The better your data, the better you are on sourcing deals and closing them. The data is inevitably where the demand is always going to be.

Trends in M&A Deals

We recently pitched a deal that was a data archiving solution for clients. The company had good revenues, had been around a while and was profitable. The struggle was that the seller’s valuation expectation started at 13x EBITDA. There’s currently a lot of froth in the market so you have a lot of sellers who expect to be at the upper end of the multiples they hear about. Because valuations are high, frankly, it makes the job of the investment banker quite a bit harder because it resets owner valuations even higher.

Cryptocurrency in M&A

I have a keen interest in blockchain and cryptocurrencies because I believe they will truly disrupt finance. I’d rather be there and in the know than swept over when it really starts to disrupt what we do.

I see some really interesting blockchain plays with tokenized equity and debt, including things like earn outs. The ability to put the earn out on a smart contract so it’s immutable and tied to a distributed ledger will be very interesting. We are not there yet, but we will get there.

Long term, there’s certain aspects to virtual currencies that are particularly compelling, especially to tokenize equity for smaller transactions. I really think it will play a bigger role on the M&A side, not just on the capital raising side, especially as they get through the growing pains and become more mainstream.

Recent SEC statements have said that most utility tokens are likely to be considered some type of security. Some regulation is certainly needed within the framework of the existing regulatory exemptions, but there needs to be some safe harbors to help combat Rule 144 for restrictions on the sale of certain utility securities, particularly for smaller businesses that might want to have a unique offering. We will get there too, but the regulators have other priorities right now.

For companies offering virtual currencies for capital raising purposes, how will this be affected by recent SEC statements?

As long as you are filing your exemptions, doing your Reg D offering to accredited investors, doing your Know Your Client (KYC) and Anti-Money Laundering (AML) filings, the Jobs Act actually helps because you can do general solicitation with Reg D 506c. There’s still a way to fit it within the regulatory framework.

We’ve seen half a dozen deals in the last month of people looking to raise money with initial tokens. I always say that it’s best to fit within the framework that the SEC has been using for years because then you have shown that you are trying to play within the rules.

What are the nuts and bolts of the Reg D process (cost and timing)?

Reg D is pretty fast when compared to say a traditional IPO. Once the attorney puts the filing together, it can be ready in a matter of a couple of weeks if you are really hustling. The cost is anywhere from $5,000 – $50,000, depending on the law firm that you use.

Do you hear of people who file their own Reg D?

I’ve heard of it, but I would never do it. Too much risk. Paying $5 – 20k to get it done right is money well spent.

If you are fully complying with SEC regulations, what is the advantage of an ICO of just issuing shares for dollars?

You have to ask, “Why a token? Why is a token important?” To most businesses, a utility coin or token (and there is a subtle difference) doesn’t really matter. A lot of recent offerings have just been riding the wave of hype.

In most cases, the compelling reason to have your own token is that you have your own network that would either want to buy or sell your token or have a product or service that you could use the token as a medium of exchange.

There are distributed applications that have true long-term sustainability. Some are issuing tokens that not only have a direct application for blockchain and distributed ledger, but also will have the network effect as a medium of exchange for whatever that digital economy might be. For example, a gaming company with 100,000 uses might issue tokens to allow users to interact/trade with each other without needing the company to step in the middle of the exchange. There are also token applications in micro transactions – because the cost of transacting is so low. As scale is reached and smaller deals can become more automated, micro transactions will benefit from blockchain disruption as well.


I don’t think we can fully disintermediate investment banking. M&A will always have a need for a banker, but tech will have a much larger impact on capital raising, particularly as investment bankers themselves get savvy and embrace the power behind some of today’s technology.