INSUBCONTINENT EXCLUSIVE:
Why raise venture capital when you can raise debt and keep your equity?That’s the question a whole slew of new financial technology
companies are hoping entrepreneurs will ask themselves as they begin to think about collecting outside capital for their businesses
Clearbanc made waves with its “20-Minute Term Sheet” campaign, with a goal of backing 2,000 businesses with $1 billion in non-dilutive
capital by the end of 2019
Now, Capital is launching to educate founders about the possibility of debt funding.Founded by former Draper Fisher Jurvetson (now known as
Threshold Ventures) investor Blair Silverberg, Csaba Konkoly and Chris Olivares, Capital is launching today with $5 million from Future
Ventures, Greycroft, Wavemaker and others
Additionally, it’s raised from “prominent institutional pools of capital” to invest between $5 million and $50 million in promising
companies, determined using “The Capital Machine.”Capital co-founder Blair Silverberg.Capital’s underwriting technology, dubbed The
Capital Machine, determines if businesses have the growth potential necessary for an infusion of debt (by analyzing revenue and other
financial considerations), then delivers term sheets within 24 hours
The expedited process cuts out the time-consuming elements of pitching venture capitalists, the company says, allowing businesses to go from
zero to $5 million — or more — in a matter of hours.For companies that are’t ready for a debt round, or that don’t meet Capital’s
qualification, the company is offering access to a free calculator that determines the cost of a company’s capital based on their
fundraising and valuation data.“We are trying to create a business that is the place that all founders go to start their fundraising
process,” Silverberg tells TechCrunch
“We just want entrepreneurs to understand that step one in building a balance sheet is to understand your cost of capital
Step two is you can now use that to compare your financing options
We hope we can make this process simpler and more transparent.”Capital charges a 5% to 15% flat fee on its capital, investing a maximum of
The company has ambitions of becoming a holistic investment bank of sorts, says Silverberg, ready and willing to advise companies on
fundraising possibilities and connect them with VCs for future deals.Historically, Silverberg explains, venture capital dollars went to
risky upstarts poised to disrupt a category
Today, loads of equity funding is funneled into predictable business models that could be funded entirely with non-dilutive capital: “I
saw what the venture process was like,” Silverberg said, referencing his stint at DFJ
“Tech companies do not utilize debt … this is extremely expensive for founders.”There’s a culture surrounding venture capital
fundraising in Silicon Valley and beyond
One in which startups seek to become “unicorns,” hoping for stories on this very site to laud their accomplishments — including the
loads of venture capital dollars they’ve pulled in
In reality, much of that capital is plowed into things like Facebook and Google to fuel digital ad campaigns, which is not how VC is
intended to be used and can result in founders taking a company public with just a few percentage points of ownership.Solutions like
Capital, Clearbanc, Lighter Capital and others should remind entrepreneurs that venture capital isn’t the only route to getting a company
off the ground and can be raised in addition to venture debt.“There’s no excuse for not knowing your cost of capital,” Silverberg
