What Happened To Dealstruck & Why Did It Fail?

Dealstruck was an online lending platform launched in 2013 to offer affordable loans to small businesses, bypassing traditional banks. Initially successful, it raised significant capital and gained traction. However, despite a strong customer base, Dealstruck closed in 2016 due to a failed crucial deal, marking its abrupt end.

What Was Dealstruck?

Dealstruck provided long-term, low-interest loans to small businesses, positioning itself as a favorable alternative to high-yield lenders. Its unique value proposition lay in leveraging technology to streamline the lending process. Notable achievements include raising $30 million in investor capital and being considered for acquisition by CAN Capital for $33 million.

What Happened to Dealstruck?

The story of Dealstruck is a compelling example of a startup's rapid rise and sudden fall, marked by several critical phases:

• Founding and Early Success: Dealstruck was founded in 2013 with the goal of offering long-term, low-interest loans to small businesses. The company quickly gained traction, raising $30 million in investor capital and positioning itself as a favorable alternative to high-yield lenders.
• Innovative Lending Solutions: Dealstruck aimed to create a borrower-friendly environment by covering out-of-pocket costs, waiving fees, and reducing prices. This approach helped the company originate $3 million a month in loans at its peak.
• Failed Acquisition Deal: Despite its initial success, Dealstruck's reliance on a crucial acquisition deal proved to be its downfall. The company received a $33 million acquisition offer from CAN Capital, which was ultimately turned down, leading to financial instability.
• Closure Due to Financial Mismanagement: The failure of the critical deal highlighted potential financial mismanagement and an over-reliance on a single transaction for continued operations. This led to the company's closure in late 2016, after more than three years in business.

When Did Dealstruck Shut Down?

Dealstruck shut down in late 2016 after more than three years in business. The closure was primarily due to a failed acquisition deal with CAN Capital, which led to financial instability and ultimately the company's demise.

Why Did Dealstruck Shut Down?

1. Failed Acquisition Deal:

   Dealstruck's reliance on a crucial acquisition deal with CAN Capital proved to be its downfall. The company received a $33 million acquisition offer, which was ultimately turned down. This decision led to financial instability, highlighting the risks of depending heavily on a single transaction for continued operations.

2. Financial Mismanagement:

   Dealstruck struggled with profitability, often covering out-of-pocket costs and waiving fees. The company faced significant defaults, including an $800,000 fraudulent loan. These financial missteps created a frantic race to raise more money before collapsing, ultimately leading to its closure in late 2016.

3. Market Conditions:

   The online lending bubble burst around 2016, partly due to scandals like the Lending Club scandal. This created a skeptical investor sentiment, making it difficult for Dealstruck to secure additional funding. The broader market challenges significantly impacted the company's ability to sustain its operations.

4. Unsustainable Business Model:

   Dealstruck's business model was unsustainable, as it struggled to balance low-interest rates with profitability. CEO Ethan Senturia acknowledged the pressure to raise capital and questioned if the business was becoming a Ponzi scheme. This unsustainable approach contributed to the company's financial instability and eventual shutdown.

5. Competitive Landscape:

   Dealstruck faced stiff competition from high-yield lenders and traditional banks. Despite its innovative approach, the company could not maintain a competitive edge. Rapid expansion without solid financial footing further exacerbated its challenges, leading to its ultimate demise.

Lessons Learned from Dealstruck's Failure

• Diversify Revenue Streams: Relying on a single deal or source of income can lead to financial instability.
• Maintain Financial Discipline: Avoid excessive spending and ensure profitability to sustain long-term operations.
• Adapt to Market Conditions: Stay agile and responsive to changing market dynamics to remain competitive.
• Build Investor Confidence: Transparent and ethical practices are crucial for securing and maintaining investor trust.
• Focus on Sustainable Growth: Rapid expansion without a solid financial foundation can lead to collapse.
• Understand Competitive Landscape: Continuously assess and adapt to the competition to maintain a market edge.
• Prepare for Contingencies: Have backup plans to mitigate risks associated with failed deals or market downturns.

We Shut Down Startups

Dealstruck's failure underscores the complexities and risks involved in running a startup, making it clear that winding down a business can be just as challenging as building one. If you're facing the difficult decision to close your startup, Book A Demo with Sunset to see how we can help you navigate this process smoothly.

Sunset takes care of all the legal, tax, and operational burdens, allowing you to avoid penalties and reduce liabilities. Let us handle the complexities so you can immediately move on to what's next—schedule a demo today.