While other VCs seek Unicorns, Indie.vc is all about cashflow
1–10 of 32 posts
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#2All about that cashflow... no bubble, no bubble.
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#3Interesting, in the context of this discussion yesterday on lessons for VCs from the industry in the 1980s [1]. Why risk so much looking for the one unicorn in a hundred when we can achieve a 500% roi focusing on cashflow [2].
"The VC community is purposely avoiding risk because we think we can make good returns without taking it. The lesson of the 1980s is that no matter how appealing this fantasy is, it’s still a fantasy."
[1] https://news.ycombinator.com/item?id=9129911 [2] Not that I'm necessarily disagreeing with that as an investment strategy. As I noted in that other discussion, this is a field where I have limited experience.
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#4The interesting thing about new financial instruments is to try to figure out the risks for all parties involved. What I'm not really getting here is that from the perspective of the company, this is like a loan with a really high interest rate and other harsh terms like the equity conversion, in exchange for no recourse. If a company had growing cashflow couldn't they just use debt financing at much better terms? And if they don't have good enough cash flow, why is this better for them than selling equity?
Will the distribution requirements be a drag on growth?
How does the company decide between reinvestment or distribution of profits?
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#5I own a bootstrapped start-up that seems to fit their profile, but their numbers seem way off to me.
They take 80% of all distributions until they're paid back 2X, then 20% until they're paid back 5X.
They're offering $100k to 8 start-ups; in order to hire a few employees with decent runway, $500k seems like the minimum useful raise.
I guess we're just too late-stage for this, which is funny, because from my research we're too early stage for most VCs.
The idea of taking 100K today so we can pay 500K tomorrow just isn't very appealing.
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#6I wonder what model you would use to evaluate a startup with varying cash flow like negative cash flow for some quarters or growing cashflow for others. I understand how to model utilities or infrastructure projects using cashflows but those models are based on having very predictable cashflow.
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#7This is clever. Paying back 500k in a couple of years is no big deal if the business reaches any kind of profitability, and the odds of getting there are much higher when you start with 100k in the bank. Bootstrapping from 0 is disproportionately difficult, so I can see how this is a great deal for some people.
The incentives are aligned too. With a deal like this it's good for the founders and for the investors if the startup gets to profitability quickly, but there's no perverse pressure to shoot for a 100x return or die trying like you get with conventional VC funding. Of course, if the startup takes off in a major way then VC funding is still on the table. Otherwise the founders will own 100% of a profitable lifestyle company. Win-win.
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#8To be honest I thought it was going to be a joke. It's actually interesting as an experiment, but they need bigger N to find out if it can possibly work. 50-100 would be more reasonable. Tho maybe it's good to start with 8, it might be impossible to even find 8 reasonable people willing to take this deal.
Anyways I doubt it's going to work. They're competing with banks at this point. But their per-company [management] overhead is an order of magnitude higher than for a bank. Most people willing to take up the offer will probably be scammers.
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#9It's worth reading indie.vc's response to this article: http://bryce.vc/post/111385165695/the-biggest-misunderstandi...
Re: While other VCs seek Unicorns, Indie.vc is all about cashflow
#10It's worth reading indie.vc's response to this article: http://bryce.vc/post/111385165695/the-biggest-misunderstandi...
[edit: seems they're not doing revenue based financing.]
"Nowhere in anything we’ve written publicly or discussed privately about indie.vc have we said we’re only interested in modest, cashflow businesses."
If they're not aiming for modest wins, then why wouldn't the startups be reinvesting as much revenue as possible back into further growth, instead of using it to immediately repay this loan? Eating up 80% of revenues to repay the loan sounds like a major damper to being able to reinvest toward further growth at those early stages.
And 100% revenue financing, instead of some kind of equity / revenue funding hybrid? Sounds like a recipe for all kinds of misaligned incentives.