January 21, 2020 TIMIA Capital : As Over-Funded Unicorns Lose Their Shine, Is Bootstrapping Finally Becoming Newsworthy?

The phenomenon of celebrating funding rounds is baffling. And it sets a poor example for new founders. We need to take the focus off the funding and place it back on enterprise value creation, revenue growth, and capital efficiency. I’m not saying that you should never take venture capital. It’s just that there’s a time and a place for it and, for the most part, early-stage founders are hugely disadvantaged by it. For early-stage founders, it’s in the best interest of the venture capitalist if you rapidly fail. Compounding returns make time your enemy—when you fail to meet the unrealistic growth targets, the VC will cash out and move on to the next shiny object. In this scenario, the founder is left with nothing and all the enterprise value creation (or potential for value creation) is destroyed. (read more…)

CATEGORY: alternative financing, capital, debt, profitability

January 20, 2020 Tristan Pollock via Medium : The New VCs: Revenue-Based Versus Shared Earnings

The tides are turning. That is, non-dilutive. No longer are startup founders limited to traditional venture capital that gives only a 1% chance of “success.” Entrepreneurs are in revolt and paying attention to new models of financing that give them refreshed optionality when looking to fund their growth. (read more…)

CATEGORY: alternative financing, resilience

December 6, 2019 SaaS Capital : SaaS Industry 2019 Observations and Thoughts for 2020

We continue to believe that the economy and capital markets will tighten over the next several years. However, there is now a large pool of committed PE dollars to support the stronger SaaS companies through a downturn. Related, we have recently seen more support for profitability, or at least more controlled losses, among the VC and startup communities that have previously decreed growth at all costs. (read more…)

CATEGORY: alternative financing, profitability, SaaS

November 24, 2019 Tristan Pollock via Medium: : The Emergence of Revenue-Based Venture Capital

“The advent for start-ups to seek alternative investment from qualified investors is due to both the myopia of VC companies, which they believe fit in their portfolio and highly inflexible terms for founders,” explains Carolina Abenante, the founder of contract management platform NYIAX. This myopia is what has brought about the rise of new venture capital firms that are focused on more than just growing fast in hopes of raking in a big return when the company goes public. (read more…)

CATEGORY: alternative financing, debt, resilience

November 4, 2019 Lighter Capital : How Revenue-Based Financing and Venture Capital Funding Work Together

As alternative financing solutions attract more attention from entrepreneurs, some VC investors are noticing more startups are turning to these options for their growth and working capital needs, many times mixing and matching RBF with a term loan, line of credit with a forward commitment, or both. These flexible, non-dilutive financing solutions scale with a business’ growth, enabling entrepreneurs to focus on their business without giving up equity, personal guarantees, or board seats; it’s understandable why entrepreneurs are increasingly seeking such solutions to reach their next growth milestone. (read more…)

CATEGORY: alternative financing, debt, growth, VC

September 16, 2019 Bigfoot Capital : The Pros and Cons of Not Selling Equity

If you’re selling equity, it better be a really good opportunity where folks just want in and can live with ceding control. If you’re not, retaining control and operating flexibility is much easier. And you’ll likely spend a lot less time explaining why you’re doing what you’re doing. (read more…)

CATEGORY: alternative financing, debt, leadership

January 29, 2019 Tech Crunch : Startup Investors Consider Revenue Share when Equity is a Bad Fit

Revenue-based financing isn’t some groundbreaking new idea, at least outside of the venture world. A revenue-share deal typically involves a capital investment that is later repaid from a share in the revenue of a growing business. It has historically been used to invest in businesses with potentially predictable cash flow and high profit margins, from Hollywood movies to high-margin service businesses. But the concept has been gaining steam in the venture capital industry. An increasing number of venture funds are actively deploying revenue-share tools. Novel GP has a $12 million fund focused on revenue-share investments in software-as-a-service companies. Indie.vc recently raised their second $30 million fund that invests through a “profit-sharing” structure by which the fund receives disbursements based on net revenue or net income, depending on which is greater. Candide Group, Adobe Capital and our affiliated fund VilCap Investments are a few more examples. (read more…)

CATEGORY: alternative financing, debt, growth

November 30, 2018 Earnest Capital : Shared Earnings Agreement

A Shared Earnings Agreement (we shorthand it as SEAL) is typically used as a substitute for equity-like structures like a SAFE, convertible note, or equity. It is not debt, doesn’t have a fixed repayment schedule, doesn’t require a personal guarantee. The goal of a SEAL is to align the interests investors and founders in a wide variety of outcomes, while giving founders full control of their business and keeping as much optionality as possible open for the business. A SEAL is a long-term commitment that in most cases lasts for the lifetime of the business, so pick your partners wisely. (read more…)

CATEGORY: alternative financing, debt, risk

October 22, 2018 TIMIA Capital : How alternative financing models are disrupting the start-up economy

The question on everyone’s mind these days is, “How close is the tech bubble to bursting?” To put it more succinctly, “Who among us is the greater fool?” From the outside, the industry looks stable. Under the covers, most investors follow the same playbook: provide funding to start-ups to drive growth; demonstrate growth to secure more funding; rinse and repeat until the company goes public or bust. Unfortunately, for most start-ups, the latter is more often the case. (read more…)

CATEGORY: alternative financing, growth, winner take all

January 11, 2018 Luke Kanies via Medium : Venture Capital Is Ripe For Disruption

By comparison, today’s system looks stable. (Although, in this case, looks are deceiving.) There are hundreds of seed and venture funds, all following the same playbook: Try to get their investments to the magic number of $1 million in annual recurring revenue (ARR), raise an A round of funding, and keep on the funding train until you go public or go bust. There’s so much pattern matching going on that founders are contorting their companies to fit the funding schedule rather than discovering their own destinies. (read more…)

CATEGORY: alternative financing, capital, VC