March 6, 2024 Claret Capital : What is the real cost of capital in Venture Debt?

To put it simply, the return Alternative Lenders need to make to justify their access to capital has increased, and therefore so has the cost for the borrower. However, venture debt providers have maintained the same cost of capital throughout, despite the increase in interest rates. (read more…)

CATEGORY: alternative financing, capital, debt

September 20, 2022 Pitchbook : Distressed venture is coming to save your orphaned startups

"Our goal is to find companies that are fundamentally good businesses with business models that make sense and are revenue-generating. They just need a second chance so that they can grow profitably and sustainably, and then have a meaningful exit for founders and investors."

CATEGORY: alternative financing, profitability, resilience, VC

July 11, 2022 Institutional Investor : There’s an Easier Way to Win in Alternatives

Given these fundraising dynamics, it’s probably an even more attractive time to be looking toward the smaller end of the market. The vacuum of capital being allocated to small managers portends still better future returns, as fewer and fewer dollars are chasing the same opportunity set. (read more…)

CATEGORY: alternative financing, capital

November 14, 2021 The Generalist : Tiger Global: How to Win

Tiger's current approach is to invest in the top decile of tech startups. If the tech sector continues to grow and the fund picks reasonably well, Tiger's returns should be strong — but it's less likely to drive the radically anomalous performance that traditional venture funds are seeking. Classic VCs are often looking to clear a 30% internal rate of return (IRR) on investments; Tiger is likely hoping for something closer to 20%. A prospectus for Tiger XV, an upcoming $10 billion vehicle shared by a private source, revealed that the fund is outperforming this threshold. IRR across 14 private entities is 34% gross and 27% net of fees. In essence, traditional venture capitalists are looking to get the best return possible within a specific time frame. Meanwhile, Tiger is looking to put as much money to work as possible at a reasonable IRR. LinkedIn tells us 188 people work at the fund, effectively managing $93 billion. That comes out to almost $500 million in assets per employee. Other leading venture funds can't come near this kind of efficiency. (read more…)

CATEGORY: alternative financing, capital, VC

February 26, 2021 Wall St Journal : SPAC Frenzy Emboldens Silicon Valley Startups to Forgo Venture Funding

SPACs have flipped the script on the multidecade model of development for early-stage startups, enabling fledgling companies with little or no revenue to tap public markets sooner. The shift lets amateur investors—long excluded from startup wealth creation—get in on the ground floor of disruptive businesses. It is a dynamic that can lead to huge returns but also carries big risks, as young companies are far more vulnerable to going belly up. Jay Ritter, a finance professor at the University of Florida who studies public stock listings, found that the shares of tech companies going public with annual sales under $50 million underperform the market by 28% over the first three years of trading. The median annual sales for tech companies completing a SPAC deal since the start of 2020 is $48 million. (read more…)

CATEGORY: alternative financing, capital, VC

April 24, 2020 Nathan Laka : Venture Debt: 50+ Options for Anti-VC SaaS Founders

There are only 2 ways to raise capital for your software company to drive growth. You can raise debt, or you can raise equity. Over the past 10 years, investors (equity) and lenders (debt) have standardized different mixes of the two to give more freedom to entrepreneurs (read more…)

CATEGORY: alternative financing, debt

April 10, 2020 SaaS Capital : Private SaaS Company Valuations: Q1 2020 Update

Based on the current public multiple, the average private SaaS would be valued at 5.9 times ARR. However, as outlined in that white paper, there are company-specific value drivers that every operator should consider as they prepare for an equity raise or sale of their company. Listed in order of importance, they are: Growth & Scale of Revenue, Market Size, Revenue Retention, Gross Margin & Revenue Mix, Customer Acquisition Efficiency & Unit Economics, Profitability (read more…)

CATEGORY: alternative financing, SaaS, valuation

March 13, 2020 TIMIA Capital : Tired Investors? Revenue Finance Can Help.

Investors can often hinder the forward traction of your company. Sometimes they put unrealistic growth expectations on the team and apply pressure to take on more equity funding. Other times, they prevent you from raising much-needed growth capital because they don’t like the valuation (yet they’re reluctant to cough up more money themselves). (read more…)

CATEGORY: alternative financing, capital, debt

March 2, 2020 Bigfoot Capital : The Pros and Cons of Series A Funding vs. Revenue-Based Financing

Although attaining funds to advance your startup can be pivotal to its success, you can bet that securing financing will take more time than a simple trip to the bank. There are lots of non-traditional financing options available and not all terms are the same. Understanding which type of financing will best meet your startup’s capital needs before pursuing of any one source of funds is crucial. (read more…)

CATEGORY: alternative financing, capital, debt

February 7, 2020 Alex Danco : Debt is Coming

The Financial Capital all-equity stack, as powerful as it is for creating something out of nothing, is and has always been at odds with the Production Capital mentality of a business builder and operator. There is nothing inherent to tech companies that requires that so many of them fail to live up to their aspirational valuations, aside from the way they’re funded. (read more…)

CATEGORY: alternative financing, debt, risk, valuation