Wayne-based business valuation firm BizEquity raises $5.1M

BizEquity, a Wayne-based business valuation firm with ties to legacy Philly tech bigwigs like Safeguard Scientifics founder Pete Musser, raised $5.1 million from Frost Brooks, a London-based private equity firm.

It’s the company’s first round of institutional funding. Previously, BizEquity raised an undisclosed angel round, with CEO Michael Carter making the single biggest investment.

Carter, 41, of Wayne, Pa., said he wasn’t initially looking for funding but it was the right move because of the networks of Frost Brooks’ limited partners, many of which work or have worked in financial services firms around the world. That’ll help with both customer acquisition and domain expertise, Carter said.

The business valuation industry is a $7.4 billion market, 'all done offline,' with no firm controlling more than two percent of the market.

BizEquity offers software that tells a business how much its worth. Pre-BizEquity, it would cost companies $8,000 and four to six weeks to find out from a business valuation firm what they were worth, Carter said. That meant that small businesses who couldn’t afford that service were left in the dark.

The business valuation industry is a “classic white space opportunity,” Carter said. He pointed to a report from IBISWorld that says that the business valuation industry is a $7.4 billion market, “all done offline” and with no company owning more than two percent of the market.

In the long term, Carter believes business valuation will become as ubiquitous as a credit score, with financial firms using it to decide who to lend to.

While BizEquity caters to small businesses who use the firm’s software to determine the valuation of their business, 75 percent of the company’s revenue comes from their distributors: banks, insurance firms and wealth management firms who buy the software in bulk and give it to their customers, Carter said. BizEquity runs customers about $40/month, with the distributors getting discounts when they buy in bulk.

Since its founding in late 2010, the company has been largely focused on product but is now ready to ramp up sales, Carter said. About 70 percent of its 20-person team in Wayne are part of the product and engineering team. Carter plans to hire six in the next three to four months, including several for the sales team. The company also has small offices in London and Singapore.

BizEquity has a flashy board of directors (not all of whom are investors, he said), including Musser, Internet Capital Group (now Actua) managing director John Loftus and Twitter’s former VP of engineering Michael Abbott. Carter met Musser, who is something of a Philly tech legend, when he worked at Cambridge Technology Partners, the first publicly-traded IT services firm where Musser was chairman.

“I read about Pete when I was in college,” said Carter, a St. Joseph’s alum. “He was kind of a hero to me.”

Through a spokesman, Musser said he thinks BizEquity will succeed because “it has focused on the market need and the product before raising too much capital.”

BizEquity’s office is in the same building that Musser currently works out of.

Carter, who grew up in Moorestown, N.J., also had a hand in building another Philadelphia startup: Old City’s Artisan Mobile. A seed stage investor in Artisan, Carter also helped get Bob Moul into the CEO position. Carter is no longer on the Artisan board of directors.