More and more start-ups don't fit the casting required by traditional VCs (to earn 3X returns for their LPs), especially in economies like India where disparities are huge. There are a significantly diverse sets of critical problems that have capital needs but will forever lie outside the term sheets of traditional VCs. A lot is at stake to ensure entrepreneurs outside the mold survive.
This is not a criticism of the model followed by traditional VCs. If the operating model of your company has deep funding needs before it can break even and if you seek rapid growth to beat your competition out of business, then the traditional means of acquiring venture capital is definitely a great option to look at.
However, it also important to remember that VCs are biased, at least in part, to invest in companies that can be the biggest in their market to be able to return large sums of capital back to their investors. As a founder, that implies bartering a certain amount of control, ownership, and optionality with the folks on the cap table. This often implies a persistent push on founders to grow as fast as possible.
Unicorns Versus Zebras
What if you are a founder whose calling isn't about an exit that's featured on the front page of a newspaper? What if you value building a sustainable and profitable business over growing large as fast as possible? What if there is a greater social cause that you believe in impacting over having to necessarily grow in a J-curve?
By no means exhaustive, the following is an unordered sample of organizations that are making progress in coming up with alternative models of investment where there is a greater alignment between investors and founders to grow a sustainable business.
Zebras Unite.Org
Besides creating awareness on alternative ownership models, the group is pioneering an effort for Exit to Community (E2C). In their own words "Rather than simply aiming for an acquisition by a more established company or a public stock offering, could startups aim to mature into ownership by their community of stakeholders?"
Earnest Captial
Through the Shared Earnings Agreement developed transparently in public, Eanest Capital works with founders who want to run a profitable business and never be forced to raise follow-on financing or sell their business.
Village Capital
An accelerator for seed-stage, impact-driven startups, Village Capital is “democratizing entrepreneurship" through initiatives like peer selected investment and investment programs for impactful solutions that don't get the support to scale in a traditional VC setup.
TinySeed
A year-long, remote accelerator designed for early-stage SaaS founders, TinySeed's investment terms "enables founders and investors to share in the winnings of a profitable business, increasing the odds of survival, and removing much of the risks of VC's 'homerun or nothing' mentality."
I am researching similar organizations inventing alternative models for investments in India for a longer article. If you are aware of any, I would appreciate a DM on Twitter or reach me at rohit [at] hey [dot] com
This is not a criticism of the model followed by traditional VCs. If the operating model of your company has deep funding needs before it can break even and if you seek rapid growth to beat your competition out of business, then the traditional means of acquiring venture capital is definitely a great option to look at.
However, it also important to remember that VCs are biased, at least in part, to invest in companies that can be the biggest in their market to be able to return large sums of capital back to their investors. As a founder, that implies bartering a certain amount of control, ownership, and optionality with the folks on the cap table. This often implies a persistent push on founders to grow as fast as possible.
Unicorns Versus Zebras
What if you are a founder whose calling isn't about an exit that's featured on the front page of a newspaper? What if you value building a sustainable and profitable business over growing large as fast as possible? What if there is a greater social cause that you believe in impacting over having to necessarily grow in a J-curve?
By no means exhaustive, the following is an unordered sample of organizations that are making progress in coming up with alternative models of investment where there is a greater alignment between investors and founders to grow a sustainable business.
Zebras Unite.Org
Besides creating awareness on alternative ownership models, the group is pioneering an effort for Exit to Community (E2C). In their own words "Rather than simply aiming for an acquisition by a more established company or a public stock offering, could startups aim to mature into ownership by their community of stakeholders?"
Earnest Captial
Through the Shared Earnings Agreement developed transparently in public, Eanest Capital works with founders who want to run a profitable business and never be forced to raise follow-on financing or sell their business.
Village Capital
An accelerator for seed-stage, impact-driven startups, Village Capital is “democratizing entrepreneurship" through initiatives like peer selected investment and investment programs for impactful solutions that don't get the support to scale in a traditional VC setup.
TinySeed
A year-long, remote accelerator designed for early-stage SaaS founders, TinySeed's investment terms "enables founders and investors to share in the winnings of a profitable business, increasing the odds of survival, and removing much of the risks of VC's 'homerun or nothing' mentality."
I am researching similar organizations inventing alternative models for investments in India for a longer article. If you are aware of any, I would appreciate a DM on Twitter or reach me at rohit [at] hey [dot] com