February 7, 2019 Sahil Lavingia via Medium : Reflecting on My Failure to Build a Billion-Dollar Company
But we were venture-funded, which was like playing a game of double-or-nothing. It’s euphoric when things are going your way–and suffocating when they’re not. And we weren’t doubling fast enough to raise the $15M+ Series B (the second major round of funding) we looked for to grow the team. (read more…)
CATEGORY: leadership, VC, winner take all
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
January 23, 2019 Recode : “Venture capital money kills more businesses than it helps,” says Basecamp CEO Jason Fried
Fried told Recode’s Kara Swisher that venture capital “kills more businesses than it helps” because the pressure to grow crazy-fast means companies keep raising money to keep their growth rate up. That, in turn, means they rarely have the opportunity to learn how to spend money in a disciplined, sustainable way. (read more…)
CATEGORY: growth, valuation, winner take all
January 11, 2019 New York Times : More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost
The event had been organized by Frank Denbow, 33, a fixture of New York’s tech scene and the founder of T-shirt start-up Inka.io, to bring together start-up founders who have begun to question the investment framework that has supercharged their field. By encouraging companies to expand too quickly, Mr. Denbow said, venture capital can make them “accelerate straight into the ground.” (read more…)
CATEGORY: growth, risk, valuation, VC
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
November 29, 2018 Pitchbook : Why this VC puts efficiency above unicorns
If you put too much money in too early, you're going to destroy the cap table and possibly see the team losing focus because they are not ready and don't know how to deploy it properly. You're also going to artificially inflate its valuation, which in the short term might make the entrepreneur happy because of the paper wealth, but what happens if they don't outperform an already-aggressive business plan? (read more…)
November 13, 2018 The Hustle : As funding rounds grow larger, fewer startups are able to raise money
Venture capital mega-funds have supercharged startup fundraising all the way down to the seed: Since 2013, the average seed round of funding has grown from $550k to more than $2m. But, as the size of rounds has increased, The Wall Street Journal writes, the number of companies receiving that funding has decreased by more than 40% (read more…)
CATEGORY: capital, growth, VC, winner take all
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
October 16, 2018 Brendan Burns via Forbes : A Faster Path To Success: Alternatives To The Traditional Startup/VC Route
I have been an early-stage tech guy my whole career since graduating from Columbia Business School during height of the dotcom boom. At heart, I am little bit of a contrarian and very much a value investor. For that reason, I was looking for a shortcut when starting my last company—I think I found one, and it’s one you can use, too. (read more…)
CATEGORY: bootstrap, leadership, profitability, resilience
October 11, 2018 The Hustle : With 1/2 as many public companies as 20 years ago, normal investors are squeezed out
According to research from The Atlantic, there are half as many public companies listed on US stock exchanges today as there were in 1997. In other words, despite a few widely publicized IPOs, most companies rely on private investment to grow — creating a system where VCs can profit from the startup economy, but average investors cannot. (read more…)
CATEGORY: capital, winner take all