Creative Startup Financing

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Providing Startup Financing Solutions Since 2001

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What types of companies is Revenue-based Finance best suited for?

Since most people are only now beginning to discover revenue-based financing they mistakenly assume that it’s an exotic new financing mechanism suitable for a only a small subset of companies. The fact is that it’s a form of financing better suited to the majority of businesses than traditional equity financing. Consider the fact that equity-based financing depends on a profitable liquidity event taking place, such as an IPO or acquisition by a deep-pocketed buyer, to make it worthwhile for the investors.  Then consider how unlikely either of those events really is for the vast majority of companies. The answer is highly unlikely. Continue reading

The Great Gaping Valuations Chasm Between Entrepreneur and Investor

Revenue-based Funding.

Revenue-based Funding.

I first started working with startups back in the late 1980s and can guarantee you that the one problem that never goes away is the Grand Canyon-like chasm between the entrepreneur’s and investor’s respective valuations.  Without getting bogged down with unnecessary detail, it usually breaks down like this. Whether the first-time capital seeker is looking for $50,000, $500,000, or $5,000,000, they always seem to settle around the magic 20% mark. That is they convince themselves that their startup is worth so much that whatever the amount being sought is, it should only require the surrender of 20% of the total equity.  Fair is fair, right? Continue reading