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Rabbit Report: KoreConX

If you’ve ever been through due diligence for any kind of business transaction, you know all the work that goes into assembling these documents. It can be cumbersome for the company, investors and also the intermediary facilitating the transaction. This is necessary for an audit, financing, M&A, or IPO. In addition, communicating with your investors and completing the voting process in a fast growing complex company, intensifies the administrative challenges.

Summary:
This R.A.B.B.I.T.
[1]  Report covers a company that is striving to alleviate some of these problems for private (and public) companies, boards of directors, lawyers, auditors and investors. It is an example of how tech that is created initially for the crowdfunding industry, can be utilized by other parts of the private capital markets.  

Company: KoreConX (www.koreconx.com)koreconx

Sector:  Trust & Transparency Tools

Location: Toronto, Canada

Deeper Dive: 

1. What problem is KoreConX solving?

KoreConX provides governance, transparency and compliance infrastructure for companies to efficiently manage their business. It organizes all corporate documents from incorporation to funding and potential merger or sale. KoreConX delivers value to 4 market participants: 1) Equity crowdfunding intermediaries that must vet and diligence companies more efficiently. 2) Private companies that need a solution to manage and communicate corporate information with directors and shareholders. 3) Investors in private companies that wish to have a single location to manage their holdings and 4) Regulators and other service providers in the private capital markets that need more efficient and standards based tools to complete their work.  

2. How does KoreConX function?

KoreConX aims to be the repository of corporate information that requires data entry once and can be easily accessible. This may help reduce legal costs spent on managing minute books and other corporate documents. KoreConX’s patent-pending platform also facilitates shareholder communication. It provides a suite of services to centralize and streamline governance functions. In addition, KoreConX allows investors to organize their personal holdings (shares, options, warrants, loans and associated documents) from the investments they have made in private companies in one place while delivering real-time company updates.

3. Why is a product like this necessary?

KoreConX has the opportunity to lower friction and cost in private capital market transactions and ongoing compliance requirements. This will be important to build trust and transparency in equity and debt crowdfunding, which will enable the market to scale. By creating a central repository for information that can be accessed by all parties (including the crowdfunding platforms themselves) it also helps to drive information standardization and completeness, which can speed up deal screening and evaluation. A service like this may signal to potential investors that a company is taking reasonable steps to demonstrate transparency.

4.  Who are the founders?

KoreConX has two co-founders Oscar A Jofre, President & CEO and Jason Futko, Chief Financial Officer. Mr. Jofre was recently ranked one of the top 100 global thought leaders in Equity Crowdfunding as well as a top 100 Fintech influencer. He is a member of the Crowdfunding Intermediary Regulatory Advocates (www.CFIRA.org) and a member of the Equity Crowdfunding Alliance of Canada (ECFA Canada). He also sits on the Executive Council of the Midmarket Alliance in the United States. Mr. Futko oversees the financial planning, management reporting, strategic partnerships and business strategy of KoreConX. He brings over 20 years of financial management, corporate finance and operational experience for both publicly listed and private companies. Mr. Futko holds a B.A. from the University of Waterloo and is a CPA.

5. What can you tell us about early traction/user experience?

KoreConX was founded in April, 2013, completed its beta in mid-2015 and claims to have more than 250,000 users. The company has secured $2.9M in contracts and is demonstrating traction in the marketplace. Mr. Jofre says they are forming strategic alliances with law firms, insurance companies and reporting agencies to market and promote their technology. The company plans to add premium services in Q1, 2017 that will introduce more features as well as announce several partnerships with industry leading companies and thought-leaders. Mr. Jofre states that his company is “in an ideal position to capitalize on the launch of Regulation Crowdfunding (Title III of the JOBS Act) in May” and plans to “focus its efforts on building out the platform in the U.S. and then continue its expansion worldwide.”

6.  What are the risks?

KoreConX must continue to focus on growth of its current product while carefully managing its development backlog to launch additional “must have” features as the market demands them. At this stage of development, companies can become distracted by adjacent market opportunities or “going global” too early. Extreme focus on sales to core customer types, to demonstrate the ability to deliver low CAC and high LTV will be important data points. Given its freemium business model, the company must focus on sales pipeline execution and maintaining low churn.

Our Perspective on KoreConX and its place in the ecosystem:

  • At a macro level, in developed economies, we see 3 phases of development of a country’s crowdfunding ecosystem. Phase 1: Crowdfunding platforms. Phase 2: Trust and transparency tools and analytics services. Phase 3: Innovations in money transfer (e.g. blockchain) and “white space” developments. When companies like KoreConX enter a country, it is a signal of a Phase 2 ecosystem. KoreConX is an early mover in providing these services in the US/Canadian markets.
  • One of the challenges we have identified in Phase 2 is a desire to “go global” too early…well ahead of it’s ability to successfully execute a global strategy. We believe very strongly in the internationalization of this industry and the disruption it is already delivering to the private capital markets. However, companies need to focus first in their home ecosystem. By building a solid foundation a company can plan and execute entry into new markets from a position of strength. We do see significant opportunities in developing economies for companies like this in the ‘Trust and Transparency’ space. 
  • As the market grows, platforms will need to build/partner/buy value added services to differentiate themselves and improve margins. KoreConX will need a “dead simple” integration process to be attractive to the high volume crowdfunding platforms and other key market participants.  

If you are you an innovative company in the debt or equity crowdfunding space that we don’t know about yet? Let us hear from you right now!   

[1] http://www.businessinsider.com/vc-analyst-claims-2016-will-be-the-year-of-the-rabbits-2016-1?r=UK&IR=T

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