New Media Ventures
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New Media Ventures

Investing in Sharing

No hockey stick, no problem

Thinking Outside the Funding Box

  • Revenue-based Financing Examples: Lighter Capital and Fledge
    The basic idea here is that investment comes in the form of a loan repaid from a startup’s revenue. Read this post on investing without exits from Fledge Managing Director Michael “Luni” Libes to learn more. Revenue redemption (example: Community Sourced Capital) allows investors to purchase equity, and the company agrees to repurchase shares out of a percentage of revenue. David Bangs over at Energy Friendly Ventures put together this great deck outlining pros/cons.
  • Direct Public Offering Example: People’s Community Market
    A DPO allows companies to raise money directly from community investors. Jenny Kassan and the team over at Cutting Edge Capital have a ton of resources on DPOs and how to decide whether they’re right for you.
  • Crowdfunding Example: CircleUp
    The equity crowdfunding space has been heating up the last couple of years, and there are a number of platforms that provide accredited investors access to early-stage investment opportunities. Circle Up has a mini-fund (called a Circle) focused exclusively on B Corps raising financing.
  • Benefit Corporation Examples: Ethical Electric and Yerdle
    A benefit corporation is a new class of corporation that voluntarily meets higher standards of corporate purpose, accountability, and transparency. (Not to be confused with B Corp, which is a certification conferred by the nonprofit B Lab.)
  • Coop/(T-Corps) Example: Namaste Solar
    T-Corps (aka cooperatives) have been around forever. Cooperatives are community organizations and business that are owned and managed by the people who use their services or by the people who work there. The Sustainable Economies Law Center and its founder Janelle Orsi are a wealth of information on cooperative models.
  • ESOP (Employee Stock Ownership Plan) Example: New Belgium Brewery
    The National Center for Employee Ownership is a great starting place to learn about these employee benefit programs - often used to buy shares of a departing founder and to reward and incentivize employees.

Challenges with New Models

  • Why would an investor go for some of these alternative loan structures? Essentially, you’re still asking them to take an enormous risk, but in some cases you’re capping their upside.
  • What are the exit strategies here? Who creates the value? Who captures the value? Should a “sharing” company IPO? (Microfinance went through a similar identity crisis back in 2007 with the IPO of Compartamos).
  • Sometimes new financing mechanisms make the cap table messy and especially make it difficult to raise follow-on financing from more traditional sources.
  • Traditional investors are used to Delaware C corps. It’s a chicken or the egg problem. It may take awhile before we find more firms willing to take the risk on an entity like the benefit corporation without more examples of successful investments into benefit corporations.
  • With all this talk of financing, what about impact? Do these new models increase the likelihood that a startup will achieve its intended social impact?

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Christie George

Investor, donor advisor, producer. Thinking and writing about the intersections of media + money + meaning.