Most founders who are raising capital look first to traditional equity VCs. But should they? Or should they look to one of the new wave of revenue-based investors?
Revenue-based investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. RBI normally requires founders to pay back their investors with a fixed percentage of revenue until they have finished providing the investor with a fixed return on capital, which they agree upon in advance.
This guest post was written by David Teten, Venture Partner, HOF Capital. You can follow him at teten.com and @dteten. This is the 5th part of our series on Revenue-based investing VC that touches on:
- Revenue-based investing: A new option for founders who care about control
- Who are the major revenue-based investing VCs?
- Should your new VC fund use revenue-based investing?
- Why are revenue-based VCs investing in so many women and underrepresented founders?
- Should you raise equity venture capital or revenue-based investing VC?