Of the Inc. 5000 companies, only 6.5% raised money from VCs and 7.7% raised from angels. Where else can fast-growing companies get funding?
More and more startups are pursuing revenue-based VCs, but it’s not a good fit for everyone. A new category of investors has emerged offering a hybrid between VC and revenue-based investment (RBI), which we call “flexible VC.”
From RBI, flexible VCs borrow the ability to reap meaningful returns without demanding founders build for an exit. From traditional equity VC, flexible VC borrows the option to pursue and reap the rewards of an outsized exit. Every flexible VC structure allows founders to access immediate risk capital while preserving exit, growth trajectory and ownership optionality.
Before raising capital, we encourage founders to dig into the nuances between different flexible VC structures.
Our categorization is not a technical one. Rather, we want to accommodate the wide variety of instruments currently offered by flexible VC investors, detailed below. As two fund managers employing flexible VC, we think it is a healthy addition to the ecosystem and will yield more predictable and stable healthy returns for investors.
Flexible VC 101: Equity meets revenue share
This is currently the most common investment structure: The flexible VC investor purchases either equity