Small businesses are the unsung heroes of the American economy, employing nearly half of the American workforce and accounting for 44% of the country's GDP. But when it comes time for small business owners to sell their companies, their options are limited.
Some turn to small business brokers, some pass the business on to their children, and some go out of business altogether. Large companies are traditionally bought at the best price, often with investment banks like Goldman Sachs, but Wall Street giants waste no time in buying acquisitions for less than $25 million.
Founded by former investment banker Ori Eldarov and ex-Meta engineer Alston Lin, OffDeal aims to fill that gap by automating investment banking tasks and providing traditional M&A services to millions of small and medium-sized businesses.
The startup, which joined Y Combinator's Winter 2024 batch, built an AI agent that finds businesses worth acquiring, matches them with institutional investors, and creates pitch decks for them. But clients never see the software; they only interact with human advisors, who work more efficiently thanks to OffDeal's software product. That's the pitch, anyway.
“All of the most important transactions in our lives involve humans,” Eldarov told TechCrunch in an interview. “The big mistake our predecessors made was that they put everything in Python code.”
OffDeal can help small businesses find buyers and buyers find small businesses, and in a demo shared with TechCrunch, Eldarov showed how the AI agent can help with both.
To help small businesses find buyers, Eldarov entered the company's website, revenue and number of employees into a digital form. OffDeal agents then scraped the company's website for information about its products, services and end markets, ultimately generating 150 qualified buyers. The agents also generated information about the buyers' past acquisitions and other factors that might influence a buyer's suitability, and provided a way to quickly contact the buyers.
For buyers using OffDeal to find potential acquisitions, the startup has created a database of 2 million U.S. small businesses that may be considering exiting their businesses over the next few years. The company uses a similar AI agent to match buyers with small businesses.
OffDeal says it has signed contracts with nine institutional investors interested in using its services, with more than 250 more on a waiting list.
OffDeal's software seems good enough to be a platform in its own right, but Eldarov argues that it isn't. The CEO says he considered building software for small business brokers but decided adoption was too slow. Instead, he decided to use the product to start his own advisory firm and compete with them.
But what if OffDeal's AI agent starts hallucinating and ruins most of the transactions? OffDeal CTO Lin acknowledges that this is not a fully solved problem in the AI industry, but that improvements in the underlying models have made it much better (OffDeal uses OpenAI's GPT-4 model). That's why OffDeal and many AI companies are adopting the approach of having their AI act as a co-pilot, rather than operating independently.
OffDeal charges 5% to 10% of the deal value for its services, roughly the same as what traditional investment banks charge, and Eldarov is confident that its AI-enabled advisers can close more deals than other small business brokers.
Using AI to automate the tedious tasks of low-level employees isn’t necessarily a new idea (see Harvey AI in the legal world and Sedric in compliance), but these startups continue to raise funding across a range of industries.
OffDeal told TechCrunch that it recently raised $4.7 million in a seed round led by AI-focused venture firm Radical Ventures. The startup charges 5% to 10% of the deal value for its services and plans to use the money to hire more advisors and invest in marketing.