When Tweens Need Cash

What kind of business is revenue-based funding (RBF) good for?  That’s one of the most frequent questions startups and investors ask as they explore RBF.  While there’s no limit to how big or small a company has to be, a lot of deals have been circling startups with between $2 million – $15 million in annual revenue.  It’s becoming a sweet spot.  The question is… why? Read more of this post

The Devils of Cash Flow

I don’t know who first said “cash flow is king.”  They should have said cash flow is a devil.  Startups are constantly damned by their cash flow.

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Revenue-Based Finance: What Would Google Do?

When it comes to revenue-based funding (RBF) one of the most common questions from startups is “how does it compare to selling stock?”  At the end of the day, is it smarter to sell some shares to an angel investor or venture capitalist, or to take an RBF obligation instead?  The problem is, a lot depends on the intricate details of any one situation.  So rather than getting bogged down in all possible variations, perhaps we can shed some light by asking a different question: What about Google?  Would RBF have been a good or bad idea for Google as an alternative to selling stock? Read more of this post

Risk of Revenue-Based Finance vs Equity and Debt

People often ask about the comparative risks/rewards between traditional venture capital (equity-based funding), bank loans (debt) and revenue-based funding.  While there are many ways to evaluate the broad concept of “risk” (ranging from Modigliani-Miller theorems to pop-psychology), one approach is to simply ask “what happens if I succeed or fail?”

Viewed this way, risk depends on whether you’re an investor giving out money or an entrepreneur receiving it.  If you’re an investor, the comparison can be visualized below: Read more of this post

Microfinance Crisis – RBF to the Rescue?

While revenue-based financing (RBF) wasn’t necessarily created with a social good in mind, few would deny the positive economic development that can happen when entrepreneurs have access to capital.  For example, venture capital-backed firms created an estimated 12.1 million jobs and $2.9 trillion in revenue between 1970 – 2008.[i] Yet access to capital remains a critical challenge, even for some of the most promising businesses worldwide. Read more of this post

Revenue-Based Funding by Corporations

There’s a difference between traditional venture capital and corporate venture capital.  While standard VCs are primarily concerned with financial goals (i.e. a high IRR%), corporate venture capital (CVC) groups such as Intel Capital, GE Capital, and the J&J Development Corp. have dual goals: financial and ‘strategic’ value.  CVC investments must somehow assist the core business of their parent companies in addition to creating financial returns. Read more of this post

4 Trends in Small Business Credit

Businesses with fewer than 500 employees account for 99.9% of US firms.  Overall there are over 6 million employer firms in the US (2006) with 600K new businesses forming every year.  Approximately 1.3 million businesses employ between ten and 1,000 employees, generating over $5 trillion in annual revenue.[i]

With profound community, national and international importance on the shoulders of small business, the following summary highlights 4 trends in US small business credit and lending. Read more of this post

Revenue-Based Finance & The Cost of Capital

How much does revenue capital cost?  In other words, how expensive is revenue-based financing (RBF) as a source of venture funding compared to equity and traditional loans?

Rather than vaulting into financial engineering, Greek equations and Modigliani-Miller debates, consider the following first-hand account:[i] Read more of this post

Global Venture Capital and Revenue-Based Finance

The United States has a problem: entrepreneurs and venture capitalists are having trouble getting funded.  Less than 1% of startups attract equity-based venture capital in the US.  Making matters worse, the US venture capital industry posted negative 10-year returns as of 2010, with a 31% decline in first quarter dollars raised by VC firms (compared with the first quarter of 2009).  Times are hard.

What about other countries?  Does the US have it better?  Worse?  How do venture capital environments compare in BRIC nations, and how can revenue-based finance help?

Read more of this post

Introduction to Revenue Capital (Video)


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