Seattle based RevenueLoan, a new startup founded by Founder’s Co-op, is open for business. Think of them as a friendly loan shark who won’t come to break your legs if you don’t pay up (I don’t think they will, anyway).
A lot of startups that have revenue don’t want to raise venture capital because of the onerous terms – lots of equity, board seats and maybe even overall control of the company. Bank debt is an option but it’s hard to get, usually requires personal guarantees and the repayment schedules can be difficult or impossible to meet. This is RevenueLoan’s sweet spot.
If you have revenue of at least $1 million a year you can qualify to get a loan from them of $100,000 – $500,000 or more. There’s no set repayment schedule. Instead you give them a percentage of your revenue over time until you’ve paid them back 3x – 5x the amount borrowed. That may take 2 years or it may take six years, says chairman Andy Sack, and they’re ok with that.
More importantly, RevenueLoan doesn’t want control of your company, or any board seats. They don’t ask for personal guarantees. There’s no equity component (although in some instances they may ask for warrants), so there is no dilution to shareholders.
And RevenueLoan has money to spend. They’ve just raised $6 million from Voyager Capital, Summit Capital, and Founder’s Co-op, and they’ve earmarked $4.5 million of that for loans.
Press release is below:
RevenueLoan Secures $6MM First Round of Institutional Financing,
The company offers innovative new financing option for small business
Seattle, WA June 4, 2010
For small businesses, raising capital has never been easy, and the recent financial crisis has effectively closed the capital markets to all but the biggest and most high-flying small companies. The gross majority of growing businesses in the northwest have no access to growth capital. These are the businesses that have the greatest potential to create jobs, turn around the economy, and otherwise transform our lives. But help is on the way for business owners in the Pacific Northwest: a new company called RevenueLoan has just opened its doors, backed by $6MM in fresh capital from Voyager Capital, Summit Capital, and Founder’s Co-op.
RevenueLoan was created to address the needs of business owners with an innovative new form of financing growth. Instead of lending money at fixed rates – which can burden young companies with unrealistic monthly payments – RevenueLoan offers loans in exchange for a percentage of future revenues, so payments start small, and only increase as the company is able to grow revenues. This approach, called revenue based finance, is common in the mining and entertainment industries, but has not been applied to the needs of small business.
The company was founded and is being managed by Andy Sack, managing partner at Founder’s Co-op. According to Sack, his experience running venture capital backed companies helped him see the benefits of revenue based finance and prompted him to create RevenueLoan. Sack says, “Revenue loans have a huge number of benefits that I know from first hand experience as an entrepreneur matter a LOT. The benefits of no personal guarantee, no dilution, no valuation negotiation, no active control provisions, and no need for a clear exit strategy make this money very appealing to entrepreneurs trying to grow their businesses. A less obvious benefit, but an important structural benefit is that revenue loans align incentives of entrepreneur and investor. ”
RevenueLoan focuses on funding early stage technology companies in the Pacific Northwest with trailing revenues of $1MM up to 5MM. In most instances, revenue loan amounts will range from $100K to $500K and beyond depending upon the company.
Erik Benson, of Voyager Capital, says that “Revenue Loan unique approach to use technology and finance to provide growth capital to a large number of businesses attracted his attention. I know first hand that companies off the beaten path geographically and thematically have a really hard time raising equity capital. I think there’s a real opportunity in finding and servicing these companies.”
According to Thomas Thurston, “Revenue Loan is on the forefront of a movement that is quietly beginning to transform the startup landscape as we know it – in an extremely positive way. We’ve seen a more than a 22X jump in the dollars invested through this type of funding over the past decade or so, and it has only begun to scratch the surface.”
“RevenueLoan focuses on a large underserved market of companies. These companies are growing but not fast enough to provide venture capital returns and don’t yet have enough assets to create meaningful availability under a working capital line. I’m excited to see RevenueLoan stepping in to support these businesses.” says Bruce Helberg, Northwest Market Manager of Silicon Valley Bank.
About Voyager Capital
Voyager Capital is a leading Pacific Northwest information technology venture capital firm, providing entrepreneurs with the resources, experience, and connections to build successful companies. Voyager invests in early and growth stage software, wireless and digital media companies, where the firm’s domain expertise and go-to-market resources help build market leaders. Voyager Capital has offices in Seattle, WA; Portland, OR; and Menlo Park, CA. Additional information found at www.voyagercapital.com.
About Summit Capital
Summit Capital is a multi-strategy, globally-oriented asset management firm, deploying capital in asset classes, investment vehicles and underlying securities deemed most attractive from a fundamental value perspective at various points throughout a full market cycle. Our style is most synonymous with endowments and foundations targeting total return allocated across a
full spectrum of asset classes through both direct and indirect active investment management. Summit Capital is based in Seattle, WA with additional information found at www.summitcapital.com.
About Founder’s Co-op
Founder’s Co-op is a seed- and early-stage investment partnership based in Seattle. The firm is led by experienced entrepreneurs Andy Sack and Chris DeVore, and invests on behalf of a hands-on limited partnership including more than 20 successful startup veterans. Founder’s Co-op helps web and mobile software entrepreneurs in the Pacific Northwest from the earliest stages of venture formation, with a hands-on approach that emphasizes agility, capital efficiency, creativity and active support from our extended community of investors and portfolio company founders. To learn more, visit us at http://www.founderscoop.com