I'm a 3x tech company founder, with one big success (Acquia), one "sell" (Pingtel), and one fail. I learned equally from all - both the gain, and the pain.
That experience has made me question whether there is a viable alternative to classic venture/angel financing structure when building a startup. I believe there is, and it is why I'm shifting my full attention to investing in "real businesses" using Indie.vc's Revenue-Based Financing model.
What is this? Until I get my own digital content up, you can learn from that of Indie.vc, whom I'm essentially cloning. See:
- The FAQ at Indie.vc's website
- A description of the type of startup this investment vehicle works well for ("Real Businesses"
- Why high-growth can be a killer, and maybe good profit margins are better
- The "v3" term sheet used by Bryce, and that I'll be using, too
- How Indie.vc thinks about returns (1/3, 1/3, 1/3 vs. 1-in-10), based on companies that are Boostrapped, Profitable, and Proud
- The full list of content by Bryce Roberts (the Indie.vc GP) on Medium
The Readers' Digest version: Investors make money by investing in real businesses that are seeking revenue & profitability first, not growth-first. Tech-focused or tech-enabled businesses that are post-revenue with some evidence of product-market fit that can use some cash to grow, but don't need it. Businesses that are interested in a financing type that is somewhere in the middle between traditional equity and debt, but where they - the business - provide the gains to the investor via redeeming the investor's interest programmatically using a percentage of (future) revenues. (This instead of investor returns being driven by capital gains from building unicorns.)
These will be primarily, probably B2B SaaS because that's where my experience is. I'll favor companies with technical founders that have found a good market, and now want money to hire their first sales & marketing employees so they can go from a few hundred thousand in ARR to several million.
I've been a mentor "In-Residence" with Techstars Boston every cohort since 2012, where I spend 30+ hours / week in the program helping companies thru the entire process. From that experience, I'll be bringing techniques to how I help my portfolio companies.
I'll provide more extensive content later to help people understand how this works. But until then, I'll propose deals here and talk directly to any syndicate member that's interested to help them through underwriting.
My deal flow will come from being widely known & visible as a Boston-area mentor / investor.
Since 2020 Q4, I've been an active angel investor and advisor to Boston-area tech startups. I've acquired this reputation through being "all-in" on two accelerators: Techstars Boston and MassChallenge (Boston and wider), plus my ~20 investments. I give lots of workshops on finding problem/solution fit, hiring, and go-to-market in the city.
These activities mean I speak to 5-10 new startups per week. I see at least 50% of the deals that happen in Boston - whether I invest or not.
But, that was all focused on traditional (Note/SAFE) investing. Starting in January 2020, I'm providing content via my Medium page to create a new vocabulary & awareness around Revenue-Based Financing. Watch for more content on a re-launched personal website later in 2020. I hope to be a go-to source for RBF-seeking founders on the east coast.