The co-founder of a firm providing market infrastructure for online investments into private companies said his vision is finally paying off after years of struggle.
Mat Dellorso is the CEO of WealthForge, a platform combining technology and third-party security measures to offer investors and companies in search of capital a faster and more transparent investor experience.
Mr. Dellorso is a featured panelist at FinFair 2015, which takes place on July 29 in New York City. FinFair combines the leadership, products and technologies driving the crowd-centric retail alternatives market with the knowledge base of established Wall Street players.
Mr. Dellorso said the idea for WealthForge began when he was classmates at the University of Richmond with WealthForge Co-Founder Fred Bryant. Mr. Bryant’s father is an angel investor and spoke of inefficiencies in the process of looking for investments. Mr. Dellorso had experience starting companies and knew the inefficiencies present in the search for capital.
“We saw the need to bring the public market infrastructure’s electronic capability into the private sector,” Mr. Dellorso said.
With WealthForge being five years old, Mr. Dellorso is in a position to know how the environment has changed from the days before the JOBS Act through today. In their first days, there essentially was no crowdfunding or peer-to-peer lending, and definitely no terms to describe activities just beginning to take shape.
If the investing public was not familiar with these concepts, regulators – those charged with determining what was safe and acceptable for others – were even further from the cutting edge either.
“It took us more than a year and a half to get FINRA and the SEC to understand what we were doing,” Mr. Dellorso said.
The pair told regulators what they wanted to do was to conduct private securities transactions online. That eventually meant submitting to audits from the SEC, FINRA and individual states, processes which totaled hundreds of thousands of dollars, Mr. Dellorso said.
The traditional capital raising process is cumbersome for both sides, Mr. Dellorso said. Investors take the time to investigate companies while companies want to make sure they are partnering with the proper investors, those who have good reputations with the right contacts and expertise.
Mr. Dellorso recalled Mr. Bryant speaking of his father and fellow angel investors going through the due diligence and finalization processes in an extremely slow fashion. Documents had to be printed, signed, faxed, signed, and faxed again. With Docusign for signature verification and PayPal for fund transfers, why was the investment process not as fast?
While it took a spell to convince Washington, the investment process is much faster, Mr. Dellorso said.
Document transmission, authorizing, and signatures are all conducted online.
Regular investors do not have to go through the exact same processes where they complete the same information every single time. Mr. Dellorso said WealthForge saves that information so they can populate the documents the next time the investor wishes to invest.
“What used to take weeks or even months now takes minutes,” Mr. Dellorso said. “It is incredibly efficient for investors to participate in deals.”
The automation process also has an opt-in component designed to weed out bad actors and includes an IP address verification system as an extra fraud prevention measure, Mr. Dellorso said.
Mr. Dellorso cautions that in 2015 technology and automation can only take the process so far and some manual verification is still necessary.
“There is no algorithm that says this deal is better than that deal, so you still have to look into it,” Mr. Dellorso said.
WealthForge also worked hard to ensure an optimal user experience on smartphones and tablets, Mr. Dellorso said.
“With many angel investors coming from older generations, we wanted to keep the user experience simple. You can complete the process on your mobile while on a train.”