Small businesses are the unsung heroes of the American economy, employing nearly half of America’s workforce and making up 44% of the country’s GDP. But when it’s time for small business owners to sell their companies, their options are limited.
Some go to small business brokers or pass the business on to their children, while others just close up shop altogether. Large corporations traditionally use investment banks, like Goldman Sachs, to get acquired for the best price, but Wall Street giants don’t waste their time on acquisitions less than $25 million.
Founded by a former investment banker, Ori Eldarov, and a former Meta engineer, Alston Lin, OffDeal is trying to bridge the gap by automating the work of investment banks to offer traditional M&A services to millions of small businesses.
The startup, part of Y Combinator’s Winter 2024 batch, created AI agents to discover good businesses to acquire, match them with institutional buyers, and create pitch decks to sell them. But customers never see the software. They only interact with human advisers, who work more efficiently thanks to OffDeal’s software product. That’s the pitch anyway.
“The most important transactions in our lives, they all involve a human,” said Eldarov in an interview with TechCrunch. “The big mistake that people before us have made is that they delegate everything to Python code.”
OffDeal can help a small business find a buyer, or a buyer to find small businesses. In a demo shared with TechCrunch, Eldarov showed how its AI agents can help with both.
To help a small business find a buyer, Eldarov input the company’s website, revenue, and number of employees into a digital form. Then OffDeal’s agent scraped the company’s website for info about its products, services, and end markets, ultimately producing 150 eligible buyers. The agent also produces information about those buyers’ previous acquisitions and other factors that make it a good match and offers a way to quickly contact them.
As for buyers looking to use OffDeal to find acquisitions, the startup created a database of 2 million American small businesses that could be looking for an exit in the coming years. It uses similar AI agents to match buyers with small businesses here.
So far, OffDeal says it’s currently under contract with nine institutional buyers looking to use its services, with over 250 others on a waitlist.
OffDeal’s software looks good enough to be a platform itself, but Eldarov insists it’s not. The CEO said he considered building software for small business brokers but figured that adoption would be too slow. Instead, he decided to build his own advisory firm using the product — then compete with them.
But what if OffDeal’s AI agents hallucinate and mess up a major part of the deal? OffDeal’s CTO, Lin, admits it’s not exactly a solved problem in the AI industry but has gotten much better with improvements to underlying models (OffDeal uses OpenAI’s GPT-4 models). That’s why OffDeal and many AI companies have taken the approach of having AI work as a copilot instead of working independently.
OffDeal charges between 5% and 10% of the transaction value for its services, a similar rate to what traditional investment banks charge. Eldarov is betting his AI-powered advisers will be able to close more deals than other small business brokers.
Using AI to automate the grunt work of low-level employees is not necessarily a new idea (see Harvey AI for the legal world or Sedric for compliance) but these startups continue to raise funds across various industries.
OffDeal tells TechCrunch it recently raised a $4.7 million seed round, led by AI-focused venture firm Radical Ventures. The startup — which charges between 5% and 10% of the transaction value for its services — plans to use this funding to hire more advisers and invest in marketing.