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ProducePay nabs $190 million debt financing to lend to farmers
Los Angeles-based ProducePay has inked a $190 million debt facility from CoVenture and TCM Capital to expand its lending business and marketplace for farmers.
ProducePay offers farmers cash advances throughout the growing season to smooth the sometimes lumpy revenues and give farmers a bit more predictability, the company said. It buys produce ahead of delivery and sets itself up as a middle-man between distributors, growers and grocers.
Since its launch in 2015, the company has seen $1.5 billion worth of produce flow across its marketplace; $750 million of those transactions were in the last year.
ProducePay’s pitch to farmers is the company’s centralized marketplace, which the company says offers growers higher pricing and certain payment from distributors, along with better pricing for supplies and services like seed, equipment and logistics services.
The marketplace service, which only launched in October, has already seen $100 million in purchases.
“In just four years, ProducePay has had a transformative effect on the financial health and success of scores of farmers and value-additive distributors in Latin America and the U.S.,” said ProducePay founder and CEO Pablo Borquez Schwarzbeck, in a statement. “This new debt facility will accelerate ProducePay’s impact, empowering more farmers and distributors to run their businesses more profitably, making high quality and affordable fresh produce available throughout the U.S.”
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Revenue-based investing: A new option for founders who care about control
David Teten is a Venture Partner with HOF Capital. He was previously a Partner for 8 years with HOF Capital and ff Venture Capital. David writes regularly at teten.com and @dteten.
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Does the traditional VC financing model make sense for all companies? Absolutely not. VC Josh Kopelman makes the analogy of jet fuel vs. motorcycle fuel. VCs sell jet fuel which works well for jets; motorcycles are more common but need a different type of fuel.
A new wave of Revenue-Based Investors are emerging who are using creative investing structures with some of the upside of traditional VC, but some of the downside protection of debt. I’ve been a traditional equity VC for 8 years, and I’m now researching new business models in venture capital.
I believe that Revenue-Based Investing (“RBI”) VCs are on the forefront of what will become a major segment of the venture ecosystem. Though RBI will displace some traditional equity VC, its much bigger impact will be to expand the pool of capital available for early-stage entrepreneurs.
This guest post was written by David Teten, Venture Partner, HOF Capital. You can follow him at teten.com and @dteten. This is part of an ongoing series on Revenue-Based Investing VC that will hit on:
- Revenue-based investing: A new option for founders who care about control
- Who are the major revenue-based investing VCs?
- Should your new VC fund use revenue-based investing?
- Why are revenue-based VCs investing in so many women and underrepresented founders?
- Should you raise equity venture capital or revenue-based investing VC?
So what is Revenue-Based Investing?
RBI structures have been used for many years in natural resource exploration, entertainment, real estate, and pharmaceuticals. However, only recently have early-stage companies started to use this model at any scale.
According to Lighter Capital, “the RBI market has grown rapidly, contrasting sharply with a decrease in the number of early-stage angel and VC fundings”. Lighter Capital is a RBI VC which has provided over $100 million in growth capital to over 250 companies since 2012.
Lighter reports that from 2015 to 2018, the number of VC investments under $5m dropped 23% from 6,709 to 5,139. 2018 also had the fewest number of angel-led financing rounds since before 2010. However, many industry experts question the accuracy of early-stage market data, given many startups are no longer filing their Form Ds.
John Borchers, Co-founder and Managing Partner of Decathlon Capital, claims to be the largest revenue-based financing investor in the US. He said, “We estimate that annual RBI market activity has grown 10x in the last decade, from two dozen deals a year in 2010 to upwards of 200 new company fundings completed in 2018.”
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CoVenture Raises $3M To Build Software For Startups
Co-founder and general partner Ali Hamed describes his firm CoVenture as “a new type of venture firm, a service-focused firm” — and he’s announcing that it’s raised $3 million in funding. For the most part, the money won’t go directly into startups, but rather to funding CoVenture’s operations. Hamed told me the firm employs 55 developers and designers… Read More
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