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At TechCrunch Disrupt, insights into key trends in venture capital

Published September 20, 2019

At TechCrunch Disrupt, the original tech startup conference, venture capitalists remain amongst the premier guests.

VCs are responsible for helping startups — the focus of the three-day event — get off the ground, and, as such, they are often the most familiar with trends in the startup ecosystem, ready to deliver insights, anecdotes and advice to our audience of entrepreneurs, investors, operators, managers and more.

In the first half of 2019, VCs spent $66 billion purchasing equity in promising upstarts, according to the latest data from PitchBook. At that pace, VC spending could surpass $100 billion for the second year in a row. We plan to welcome a slew of investors to TechCrunch Disrupt to discuss this major feat and the investing trends that have paved the way for recording funding.

Mega-funds and the promise of unicorn initial public offerings continue to drive investment. SoftBank, of course, began raising its second Vision Fund this year, a vehicle expected to exceed $100 billion. Meanwhile, more traditional VC outfits revisited limited partners to stay competitive with the Japanese telecom giant. Andreessen Horowitz, for example, collected $2.75 billion for two new funds earlier this year. We’ll have a16z general partners Chris Dixon, Angela Strange and Andrew Chen at Disrupt for insight into the firm’s latest activity.

At the early-stage, the fight for seed deals continued, with larger funds moving downstream to muscle their way into seed and Series A financings. Pre-seed has risen to prominence, with new funds from Afore Capital and Bee Partners helping to legitimize the stage. Bolstering the early-stage further, Y Combinator admitted more than 400 companies across its two most recent batches,

We’ll welcome pre-seed and seed investor Charles Hudson of Precursor Ventures and Redpoint Ventures general partner Annie Kadavy to give founders tips on how to raise VC. Plus, Y Combinator CEO Michael Seibel and Ali Rowghani, the CEO of YC’s Continuity Fund, which invests in and advises growth-stage startups, will join us on the Disrupt Extra Crunch stage ready with tips on how to get accepted to the respected accelerator.

Moreover, activity in high-growth sectors, particularly enterprise SaaS, has permitted a series of outsized rounds across all stages of financing. Speaking on this trend, we’ll have AppDynamics founder and Unusual Ventures co-founder Jyoti Bansal and Battery Ventures general partner Neeraj Agrawal in conversation with TechCrunch’s enterprise reporter Ron Miller.

We would be remiss not to analyze activity on Wall Street in 2019, too. As top venture funds refueled with new capital, Silicon Valley’s favorite unicorns completed highly anticipated IPOs, a critical step toward bringing a much needed bout of liquidity to their investors. Uber, Lyft, Pinterest, Zoom, PagerDuty, Slack and several others went public this year, and other well-financed companies, including Peloton, Postmates and WeWork, have completed paperwork for upcoming public listings. To detail this year’s venture activity and IPO extravaganza, David Krane, CEO and managing partner of Uber and Slack investor GV, will be on deck, as will Sequoia general partner Jess Lee, Floodgate’s Ann Miura-Ko and Aspect Ventures’ Theresia Gouw.

There’s more where that came from. In addition to the VCs already named, Disrupt attendees can expect to hear from Bessemer Venture Partners’ Tess Hatch, who will provide her expertise on the growing “space economy.” Forerunner Ventures’ Eurie Kim will give the Extra Crunch Stage audience tips on building a subscription product, Mithril Capital’s Ajay Royan will explore opportunities in the medical robotics field and SOSV’s Arvind Gupta will dive deep into the cutting-edge world of health tech and more.

Disrupt SF runs October 2-4 at the Moscone Center in the heart of San Francisco. Passes are available here.

IEX’s Katsuyama is no flash in the pan

Published September 17, 2019

When you watch a commercial for one of the major stock exchanges, you are welcomed into a world of fast-moving, slick images full of glistening buildings, lush crops and happy people. They are typically interspersed with shots of intrepid executives veering out over the horizon as if to say, “I’ve got a long-term vision, and the exchange where my stock is listed is a valuable partner in achieving my goals.” It’s all very reassuring and stylish. But there’s another side to the story.

I have been educated about the realities of today’s stock exchange universe through recent visits with Brad Katsuyama, co-founder and CEO of IEX (a.k.a. The Investors Exchange). If Katsuyama’s name rings a bell, and you don’t work on Wall Street, it’s likely because you remember him as the protagonist of Michael Lewis’s 2014 best-seller, Flash Boys: A Wall Street Revolt, which explored high-frequency trading (HFT) and made the case that the stock market was rigged, really badly.

Five years later, some of the worst practices Lewis highlighted are things of the past, and there are several attributes of the American equity markets that are widely admired around the world. In many ways, though, the realities of stock trading have gotten more unseemly, thanks to sophisticated trading technologies (e.g., microwave radio transmissions that can carry information at almost the speed of light), and pitched battles among the exchanges, investors and regulators over issues including the rebates stock exchanges pay to attract investors’ orders and the price of market data charged by the exchanges.

I don’t claim to be an expert on the inner workings of the stock market, but I do know this: Likening the life cycle of a trade to sausage-making is an insult to kielbasa. More than ever, trading is an arcane, highly technical and bewildering part of our broader economic infrastructure, which is just the way many industry participants like it: Nothing to see here, folks.

Meanwhile, Katsuyama, company president Ronan Ryan and the IEX team have turned IEX into the eighth largest stock exchange company, globally, by notional value traded, and have transformed the concept of a “speed bump” into a mainstream exchange feature.

Brad Katsuyama. Image by Joshua Blackburn via IEX Trading

Despite these and other accomplishments, IEX finds itself in the middle of a vicious battle with powerful incumbents that seem increasingly emboldened to use their muscle in Washington, D.C. What’s more, new entrants, such as The Long-Term Stock Exchange and Members Exchange, are gearing up to enter the fray in US equities, while global exchanges such as the Hong Kong Stock Exchange seek to bulk up by making audacious moves like attempting to acquire the venerable London Stock Exchange.

But when you sell such distinct advantages to one group that really can only benefit from that, it leads to the question of why anyone would want to trade on that market. It’s like walking into a playing field where you know that the deck is stacked against you.

As my discussion with Katsuyama reveals, IEX may have taken some punches in carving out a position for itself in this high-stakes war characterized by cutting-edge technology and size. However, the IEX team remains girded for battle and confident that it can continue to make headway in offering a fair and transparent option for market participants over the long term.

Gregg Schoenberg: Given Flash Boys and the attention it generated for you on Main Street, I’d like to establish something upfront. Does IEX exist for the asset manager, the individual, or both?

Brad Katsuyama: We exist primarily for the asset manager, and helping them helps the individual. We’re one step removed from the individual, and part of that is due to regulation. Only brokers can connect to exchanges, and the asset manager connects to the broker.

Schoenberg: To put a finer point on it, you believe in fairness and being the good guy. But you are not Robinhood. You are a capitalist.

Katsuyama: Yes, but we want to make money fairly. Actually, we thought initially about starting the business as a nonprofit, But once we laid out all the people we would need to convince to work for us, we realized it would’ve been hard for us to attract the skill sets needed as a nonprofit.

Schoenberg: Do you believe that the US equity market today primarily serves investors or traders?

Accel and Sequoia seed Middesk with $4M to background check businesses

Published September 12, 2019

For those of you that diligently follow the hot startups to graduate from Y Combinator’s accelerator program, you might recall Middesk.

The company was amongst an exclusive subset of startups in YC’s winter 2019 batch to walk into demo day term sheet in hand. Top VCs, like Accel and Sequoia Capital, couldn’t wait until the team’s public pitch was complete to seed the company.

Middesk performs background checks, but not of people; rather, the startup helps companies identify business and regulatory risk in their customer base. Today, it’s announcing its first round of capital, a $4 million financing led by Accel’s Rich Wong, with participation from Sequoia. Founded by two early employees of another YC graduate, Checkr, which automates the pre-employment background check process for companies, Middesk chief executive officer Kyle Mack and chief technology officer Kurt Ruppel wanted to apply their learnings to a business identity product.

“What we’ve built from the ground up is a product to help companies understand who their customers are and what those customers do for their business,” Mack explains.

Selling a product in a traditional and heavily regulated industry, Mack says having top-tier, established venture funds Accel and Sequoia on board has made a big difference for the company. This is particularly interesting, given the round comes at a time in which competition for early-stage deals is greater than ever. More and more billion-dollar funds are moving downstream to purchase stakes in promising companies as early as possible, beating out seed funds by providing better terms and brand recognition.

The fight for seed

Accel was also an early investor in Checkr, which most recently raised a $100 million Series C at a $900 million valuation, and was familiar with the Middesk team prior to the company’s formation: “One of the nice things about this job is if you have a chance to do it right, you can build relationships with people and work with them across multiple companies,” Accel’s Wong tells TechCrunch.

San Francisco-based Middesk is working with customers, including Checkr and Plaid, a well-financed leader in fintech, as well as smaller entrants to the B2B market, like the even more recent YC-grad Vouch, which sells business insurance to startups. Mack says they are particularly focused on payments, lending, payroll, expenses and credit businesses, or those with regulatory risk requirements.

“Effectively anyone that’s touching money that’s a B2B business has regulatory requirements to do what we do,” Mack said. “There is a whole new wave of companies applying consumer-style experiences to business products, but the risks they deal with, they aren’t designed to manage those risks at scale.”

With the infusion of capital, Middesk has grown its team from two to seven, creating engineering and operations teams in the process. In the long term, Mack cites Plaid and its proven ability to rapidly become the go-to tool for connecting applications to consumer bank accounts, as inspiration.

“We talk about this idea of becoming a single source for all the external signals you might want to have about a business,” he said. “Plaid has built a single place to get a host of transaction data of people and businesses. We think about Middesk as a single place to find high-quality and trusted information for a single business.”

To fund Y Combinator’s top startups, VCs scoop them before Demo Day

Top VCs on the changing landscape for enterprise startups

Published September 6, 2019

Yesterday at TechCrunch’s Enterprise event in San Francisco, we sat down with three venture capitalists who spend a lot of their time thinking about enterprise startups. We wanted to ask what trends they are seeing, what concerns they might have about the state of the market and, of course, how startups might persuade them to write out a check.

TC Sessions: Enterprise

We covered a lot of ground with the investors — Jason Green of Emergence Capital, Rebecca Lynn of Canvas Ventures and Maha Ibrahim of Canaan Partners — who told us, among other things, that startups shouldn’t expect a big M&A event right now, that there’s no first-mover advantage in the enterprise realm and why grit may be the quality that ends up keeping a startup afloat.

On the growth of enterprise startups:

Jason Green: When we started Emergence 15 years ago, we saw maybe a few hundred startups a year, and we funded about five or six. Today, we see over 1,000 a year; we probably do deep diligence on 25.

What is Andela, the Africa tech talent accelerator?

Published August 29, 2019

As someone who covers Africa’s tech scene, I’m frequently asked about Andela . That’s not surprising, given the venture gets more global press (arguably) than any startup in Africa.

I’ve found many Silicon Valley investors have heard of Andela but aren’t exactly sure what it does.

In a bite, Andela is Series D stage startup―backed by $180 million in VC―that trains and connects African software developers to global companies for a fee.

The revenue-focused venture is often misread as a charity. In 2017, Andela CEO Jeremy Johnson described the organization as “a mission-driven for-profit company” ― a model for the concept “that you can actually build businesses that create real impact.”

I asked Johnson recently to clarify the objective behind Andela’s drive. “It’s the exact same mission as when we started, based around our founding principle… that brilliance and talent are distributed equally around the world, but opportunity is not,” he said.

“We’re about breaking down the walls that prevent brilliance and opportunity from connecting to each other.”

A major barrier for Africa’s software engineers, according to Johnson, is simply the fact that the continent has been totally off the network that companies look to for developer talent.

SAP & Pricefx cover hot topics at TechCrunch’s Sept. 5 Enterprise show in SF

Published August 27, 2019

You can’t talk enterprise software without talking SAP, one of the giants in a $500 billion industry. And not only will SAP’s CEO Bill McDermott share insights at TC Sessions: Enterprise 2019 on September 5, but the company will also sponsor two breakout sessions.

The editors will sit down with McDermott and talk about SAP’s quick growth due, in part, to several $1 billion-plus acquisitions. We’re also curious to hear about his approach to acquisitions and his strategy for growing the company in a quickly changing market. No doubt he’ll weigh in on the state of enterprise software in general, too.

Now about those breakout sessions. They run in parallel to our Main Stage set and we have a total of two do-not-miss presentations for you to enjoy. On September 5, you’ll enjoy three breakout sessions –two from SAP and one from Pricefx. You can check out the agenda for TC Sessions: Enterprise, but we want to shine the light on the sponsored sessions to give you a sense of the quality content you can expect:

Innovating for a Super-Human Future
Martin Wezowski (SAP) We talk about change, but what are the mechanics and the dynamics behind it? And how fast is it? The noted futurist will discuss what it means to be an innovator is transforming faster than before, and this transformation is deeply rooted in the challenges and promises between cutting-edge tech and humanism. The symbiosis between human creativity & empathy and machine intelligence opens new worlds for our imagination in a time when “now” has never been so temporary, and helps us answer the question: “What is human, and what is work in a superhuman future?” (Sponsored by SAP)
Pricing from Day One
Madhavan Ramanujam (Simon-Kucher & Partners, Gabriel Smith) and Darius Jakubik (Pricefx) A key ingredient distinguishing top performing companies is clear focus on price. To maximize revenue and profits, pricing should be a C-level / boardroom consideration. To optimize pricing, you should think about price when determining which products and features to bring to market; put the people, process and technology in place to optimize it; and maintain flexibility to adjust strategy and tactics to respond to changing markets. By doing so, companies unlock the single greatest profit lever that exists. (Sponsored by Pricefx)
Cracking the Code: From Startup to Scaleup in Enterprise Software
Ram Jambunathan (SAP.iO), Lonnie Rae Kurlander (Medal), Caitlin MacGregor (Plum) and Dimitri Sirota (BigID) The startup journey is hard. Data shows that 70% of upstart tech companies fail, while only 1% of these startups will go on to gain unicorn status. Success in enterprise software often requires deep industry experience, strong networks, brutally efficient execution and a bit of luck. This panel brings together three successful SAP.iO Fund-backed enterprise startups for an open discussion on lessons learned, challenges of scaling and why the right strategic investors or partners can be beneficial even at early stages. (Sponsored by SAP)

TC Sessions: Enterprise 2019 takes place in San Francisco on September 5. It’s a jam-packed day (agenda here) filled with interviews, panel discussions and breakouts — from some of the top minds in enterprise software. Buy your ticket today and remember: You receive a free Expo-only pass to TechCrunch Disrupt SF 2019 for every ticket you buy.

Ping Identity files for $100M IPO on Nasdaq to trade as ‘PING’

Published August 23, 2019

Some eight months after it was reported that Ping Identity’s owners Vista Equity had hired bankers to explore a public listing, today Ping Identity took the plunge: the Colorado-based online ID management company has filed an S-1 form indicating that it plans to raise up to $100 million in an IPO on the Nasdaq exchange under the ticker “Ping.”

While the initial S-1 filing doesn’t have an indication of price range, Ping is said to be looking at a valuation of between $2 billion and $3 billion in this listing.

The company has been around since 2001, founded by Andre Durand (who is still the CEO), and it was acquired by Vista in 2016 for about $600 million — at a time when a clutch of enterprise companies that looked like strong IPO candidates were going the private equity route and staying private instead.

But more recently, there has been a surge in demand for better IT security linked to identity and authentication management, so it seems that Vista Equity is selling up. The PE firm is taking advantage of the fact that the market’s currently very strong for tech IPOs, but there is so much M&A in enterprise right now (just yesterday VMware acquired not one but two companies, Carbon Black for $2.1 billion and Pivotal for $2.7 billion) that I can’t help but wonder if something might move here too.

The S-1 reveals a number of details on the company’s financials, indicating that it’s currently unprofitable but on a steady growth curve. Ping had revenues of $112.9 million in the first six months of 2019, versus $99.5 million in the same period a year before. Its loss has been shrinking in recent years, with a net loss of $3.1 million in the first six months of this year versus $5.8 million a year before (notably in 2017 overall it was profitable with a net income of $19 million. It seems that the change is due to acquisitions and investing for growth).

Its annual run rate, meanwhile, was $198 million for the first six months of the year, compared to $159.6 million in the same period a year ago.

The area of identity and access management has become a cornerstone of enterprise IT, with companies looking for efficient and secure ways to centralise how not just their employees, but their customers, their partners and various connected devices on their networks can be authenticated across their cloud and on-premise applications.

The demand for secure solutions covering all the different aspects of a company’s IT stack has grown rapidly over recent years, spurred not just by an increased move to centralised applications served through the cloud, but also by the drastic rise in breaches where malicious hackers have exploited vulnerabilities and loopholes in companies’ sign-on screens.

Ping has been one of the bigger companies building services in this area and tackling all of those use cases, competing with the likes of Okta, OneLogin, AuthO, Cisco and dozens more off-the-shelf and custom-built solutions.

The company offers its services on an SaaS basis, covering services like secure sign-on, multi-factor authentication, API access security, personalised and unified profile directories, data governance and AI-based security policies. It claims to be the pioneer of “Intelligent Identity,” using AI to help its system analyse user, device and network behavior to better identify potentially malicious activity.

More to come.

Should you raise equity venture capital or revenue-based investing VC?

Published August 21, 2019

David Teten
Contributor

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.

From the founders’ point of view, the advantages of the RBI model are:

Why are revenue-based VCs investing in so many women and underrepresented founders?

Published August 20, 2019

David Teten
Contributor

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.

More posts by this contributor

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?

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 researching new business models in venture capital. As I’ve learned about this model, I’ve been impressed by how these venture capitalists are accomplishing a major social impact goal… without even trying to.

Many are reporting that they’re seeing a more diverse pool of applicants than traditional equity VCs — even though virtually none have a particular focus on women or underrepresented founders. In addition, their portfolios look far more diverse than VC industry norms.

For context, revenue-based investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. RBI normally requires founders to pay back their investors with a fixed percentage of revenue until they have finished providing the investor with a fixed return on capital, which they agree upon in advance. For more background, see “Revenue-based investing: A new option for founders who care about control“.

I contacted every RBI venture capital investor I could identify, and learned:

John Borchers, Co-founder and Managing Partner of Decathlon Capital, reports that “37% of our portfolio companies would be considered ‘impact’ qualified companies. This includes companies that would meet most institutional definitions for impact investing (women, minority, and veteran owned/run businesses, including LMI (“Low to Moderate Income”) and CRA (“Community Reinvestment Act”) qualified companies. While we do lots of work in these areas due to the attractive opportunity set, we are not an impact investor, and impact qualification is not a criterion that we use in evaluating or funding companies. On an organic basis, 13% of our portfolio companies are women-owned or run businesses, while 19% of the companies we work with are minority-owned or run. When you look at the composition of the entire founding or executive teams, the number of companies with either a woman or minority in management jumps even higher and is north of 50%.”
Indie.VC reports, “…50% of the teams we’ve funded are led by female founders and nearly 20% are led by black founders.”
Lighter Capital reports that they’ve funded companies in 30 states, including well established startup hubs and less mature ecosystems.
According to Derek Manuge, CEO of Corl, in the past 12 months, 500+ companies have applied to Corl for funding. Of the ones who received capital, “30% were led by women, and 40% were led by executives of non-Caucasian or of mixed ethnic origin.”
Feenix Partners reports that “35% of our portfolio companies have either a female or minority (non-Caucasian) CEO or Owner.”
Michelle Romanow, co-founder and CEO of Clearbanc, says that “We have funded eight times more women than the venture capital industry average – probably because we’re not doing meetings, which is an amazing accomplishment, and that’s not because we do different sourcing or anything else. It was just because we looked at data.” (Note that Clearbanc has a somewhat different business model than the RBI VCs I list here.)
Founders First Capital is the only RBI VC I’ve identified with a specific focus on underrepresented founders. Kim Folsom, Co-Founder, reports that as of August 2019, Founders First’s portfolio was 80% women and 55% women of color; 70% people of color; 20% military veterans; and 71% located in low/moderate income areas. 85% of their companies have under $1m in annual revenues. I can also announce exclusively that according to Kim Folsom, “Founders First Capital Partner (F1stcp) has just secured a $100M credit facility commitment from a major institutional impact investor. This positions F1stcp to be the largest revenue-based investor platform addressing the funding gap for service-based, small businesses led by underserved and underrepresented founders.”

By contrast, according to PitchBook Data, since the beginning of 2016, companies with women founders have received only 4.4% of venture capital deals. Those companies have garnered only about 2% of all capital invested. This is despite the fact that the data says that in fact you’re better off investing in women.

Paul Graham href=”http://www.paulgraham.com/bias.html”> observes, “many suspect that venture capital firms are biased against female founders. This would be easy to detect: among their portfolio companies, do startups with female founders outperform those without?

A couple months ago, one VC firm (almost certainly unintentionally) published a study showing bias of this type. First Round Capital found that among its portfolio companies, startups with female founders outperformed those without by 63%.”

Image via Getty Images / runeer

Why are RBI investors investing disproportionately in women & underrepresented founders, and vice versa: why do these founders approach RBI investors?

I’d argue it’s not that RBI is so unbiased and attractive; it’s that traditional equity VC is biased structurally against some women and underrepresented founders.

The Boston Consulting Group and MassChallenge, a US-based global network of accelerators, partnered to study why “women-owned startups are a better bet”. Through their analysis and interviews, BCG identified three primary reasons why female founders are less likely to receive VC funds.

The study used multivariate regression analysis to control for education levels and pitch quality to conclude that gender was a statistically significant factor. I argue that these 3 reasons are much less applicable for RBI investors than for conventional VCs.

Less need for a belief in breakthrough technology. From the study: “More than men, women founders and their presentations are subject to challenges and pushback. For example, more women report being asked during their presentations to establish that they understand basic technical knowledge. And often, investors simply presume that the women founders don’t have that knowledge.” However, companies with a focus on early profitability are less likely to require an investor to believe in complex, hard-to-predict new technology which is hard to diligence. Instead, the company can pitch itself based on a credible financial projection.
Realistic projections. “Male founders are more likely to make bold projections and assumptions in their pitches,” BCG observes, while, “Women, by contrast, are generally more conservative in their projections and may simply be asking for less than men.” However, to raise RBI a woman founder does not need to promise a valuation of $1 billion within 5 years. Rent the Runway co-founder and CEO Jennifer Hyman said in a recent interview with CNBC’s Julia Boorstin, “I haven’t been given the permission or privilege to lose a billion every quarter… I’ve had to bring my company towards profitability…”
Concentration in consumer/branded products startups. BCG reports that, “Many male investors have little familiarity with the products and services that women-founded businesses market to other women”—especially in categories such as childcare or beauty. However, RBI investors report that they see a lot of proposals for ecommerce and consumer packaged goods geared to mothers. Meghan Cross Breeden, Cofounder of Amplifyher Ventures, observes, “Personal customer attachment shouldn’t be a factor in investing; the early investors in Snapchat and Facebook weren’t the Gen Z target demo. Rather, I would imagine that one explanation of women garnering rev-share modes of financing is the prevalence of women-led companies in the consumer/branded goods field, which systemically is more tangible and revenue driven. Therefore, there’s more revenue to share – as opposed to the typical venture business, which requires capital upfront before a J curve of growth.”

Traditional equity VCs are looking for high-risk, high-reward, “swing for the fences” models. The founders of such companies inherently are taking financial risk, reputational risk, and career risk.

Paul Graham, co-founder of Y Combinator, said, “few successful founders grew up desperately poor.” Ricky Yean, a serial founder, agrees: “building and sustaining a company that is “designed to grow fast” is especially hard if you grew up desperately poor”.

Most of the founders of the paradigmatic VC home runs were privileged: male, cisgender, well-educated, from affluent families, etc. Think Bill Gates and Mark Zuckerberg .

That privilege makes it easier for them to take very high risk. The average person, worried about students loans and long term employability, quite rationally is less likely to take the huge risk of founding a company. It’s far safer to just get a job.

Investors who back diverse teams can win much higher returns than the industry norm. Both RBI investors and the founders they back will hopefully benefit from this pattern.

For further reading

Note that none of the lawyers quoted or I are rendering legal advice in this article, and you should not rely on our counsel herein for your own decisions. I am not a lawyer. Thanks to the experts quoted for their thoughtful feedback.

Should your new VC fund use revenue-based investing?

Published August 20, 2019

David Teten
Contributor

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.