The Alt Finance Landscape

Non-VC financing solutions for startups

Snapshot of the Alt Finance Landscape — by Reformation Partners

99% of companies don’t raise venture capital. However, many startups within that 99% — especially at the early stages — could use incremental capital to grow their business. Even for those companies that are profitable, having extra cash could help the founders execute on tasks simultaneously vs. sequentially, enabling them to move faster and pursue opportunities sooner.

Unfortunately, there’s a problem: for that 99%, there historically hasn’t been a source of financing available to them outside of venture capital. This results in a “financing gap” for many good businesses: they’re not a fit for venture capital (or prefer to eschew VC), they’re too early for growth equity and private equity, and they’re too risky for debt (venture debt providers, who typically lend to startups, are usually underwriting to venture equity, meaning they’ll only lend to companies that have raised equity capital from an established VC firm). This leaves companies with one option: bootstrapping.

While bootstrapping has the benefits of maintaining more ownership in your business, it has its downsides, too. For one, there is an immense amount of pressure involved in self-funding, maxing out credit cards, taking a personal guarantee loan against your home, and begging every aunt and uncle to invest in your business idea. Additionally, bootstrapping has the cost of limited growth due to limited resources, resulting in missed or postponed opportunities; while companies may not need the mega-rounds of VC, having some extra capital could help immensely in the short-term. As a result, there has been a rise in demand for new financing options that sit between the two extremes of venture capital and bootstrapping.

Enter Alternative Financing. Eventually, with enough demand, solutions begin to surface, and this market gap is being addressed by a variety of new financing options. Interestingly, these new financing options are coming from a wide range of entities: large and small, coastal and non-coastal, operating companies and financing companies, old school corporations and new school startups. Perhaps just as interesting, the structures of these financing options range widely: revenue-based financing, factoring, asset-based lending, crowdfunding, income sharing, good old venture debt financing, and more.

As equity investors interested in the best capital efficient businesses, we at Reformation have created our own internal database — the Alt Finance Landscape — that maps out the key players offering solutions in this space. Today, we’ve decided to share that resource with the world in order to increase transparency in the market and help founders identify potential capital providers for their businesses.

You can view the Alt Finance Landscape both below and linked here.

While we have compiled this list to the best of our abilities, we acknowledge that it might not be comprehensive. If you are a capital provider who is on the list or wishes to be included, please reach out.

Similarly, if you are a founder who wishes to be connected with any firms on this list, or if you simply want our thoughts, we are happy to help and encourage you to reach out.

Ultimately, we hope this is a helpful resource for founders as they think through financing options for their companies. In our opinion, for the 99%, there has never been a better time to launch and scale a business.

Alt Finance Landscape — by Reformation Partners



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