The document discusses alternative funding models for startups beyond conventional venture capital. It outlines various types of venture debt, equity investment models, and revenue share agreements. It notes that conventional VC often results in high failure rates for startups and low returns for investors. The document advocates for funding women-led and diverse founding teams, who tend to receive lower valuations but higher returns. It encourages entrepreneurs to consider all options and ask hard questions to determine the best path forward for their particular company.

1. Funding Growth at Every Stage
Gillian Muessig
Anne Kennedy
Managing Directors, Mastersfund
The Capital Stack

3. A little history…

4. GEORGES
FREDERIC
DORIOT
Investor
Founder of INSEAD & ARD
Military Strategist
Harvard Educator

5. FOR TOO LONG, we’ve been taking…
a hatchet
to scalpel job

6. TECH STACK

7. THINK
BROADLY
& DEEPLY

8. VENTURE
FUNDING
IS EVOLVING
(finally!)

9. CONVENTIONAL VENTURE EQUITY

10. A reality check…

11. Are venture funded companies
more profitable to founders?

12. We-e-e-e-e-lllllllll….

13. NOT ALWAYS…
https://www.amazon.com/Lost-Founder-Painfully-Honest-Startup/dp/0735213321

14. Venture debt models

15. VENTURE DEBT
Bridge Loans
Revenue Share Agreements
Dividend Models
Royalty Agreements
Traditional Loans

16. BRIDGE LOANS

17. FACTORING & LINES OF CREDIT
Graphic credit: https://nealfunding.com/what-is-an-accounts-receivable-loan/

18. REVENUE SHARE LOANS

19. DIVIDEND MODEL

20. ROYALTY AGREEMENTS
Well, not exactly. ;-)

21. Private Loans

22. Equity Investment Models

23. CONVENTIONAL VENTURE EQUITY
Well, not exactly. ;-)
https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/

24. As a whole,
the VC industry
has a poor
reputation
among
entrepreneurs.

25. 80% of all conventionally
venture-funded startups
will fail within 5 years
VENTURE CAPITAL BY THE NUMBERS
https://medium.com/ceoquest/why-80-of-all-startups-fail-and-what-you-can-do-to-succeed-328f080b22b8

26. 16% will not achieve an IPO*
or sale. They will not return
an ROI to their funds
VENTURE CAPITAL BY THE NUMBERS
* IPO = Initial Public Offering
https://www.cbinsights.com/research/startup-failure-post-mortem/

27. Fewer than 4%
will have a
successful exit
VENTURE CAPITAL BY THE NUMBERS
http://startupsusa.org/women-founded-venture-backed-startups/Report_Final.pdf

28. 28
Are VCs making mistakes
on 96% of funding decisions?
THE QUESTION IS BEGGED:

29. WE THINK NOT!
WE NEED MORE APPROPRIATE FUNDING MODELS
Photo credit: https://legaldesk.com/startup/various-funding-models-for-startups

30. Gillian Muessig and Anne Kennedy
STRIUCTURED EQUITY | REDEEMABLE PREFERRED INVESTMENTS

31. REDEEMABLE PREFERRED EQUITY
Make an equity investment as the company
becomes revenue-positive
Provide executive guidance to form a board,
increase sales and gross margins, and
advantageous Series A funding as the
company begins to scale
Company redeems the equity at a 3X
multiple. We retain the right to invest
alongside Series A investors with a 20%
discount

32. Gillian Muessig and Anne Kennedy
WE FUND WOMEN-LED, DIVERSE TEAMS

33. A little perspective…

34. Conventional VCs invest
just 2% of capital in
women-led businesses
UNDERSERVED MARKETS
LOW COMPETITION FOR HIGH QUALITY DEALS

35. 84% LOWER ENTRY VALUATIONS
Average all-male
pre-money valuation
$400 Million
Average women-led
pre-money valuation
$65 Million
LOWER COMPETITION RESULTS IN ATTRACTIVE VALUATIONS

36. $50 MM –
Average capital
raised by women
CAPITAL EFFICIENT
$226 MM –
Average capital
raised by men
https://qz.com/work/1372843/quartz-analyzed-the-top-female-founders-to-understand-why-their-companies-are-worth-just-20-of-mens/
CAPITAL EFFICIENCY CORRELATES TO LESS DILUTION

37. Women-led startups
create 78¢ more
revenue per
funded dollar
WOMEN DELIVER MORE THAN TWICE THE REVENUE
Men-led startups
create 31¢ more
revenue per
funded dollar
https://thenextweb.com/business/2018/08/07/women-founders-get-less-funding-than-men-but-make-double-the-revenue/
GREATER ECONOMIC VALUE

38. Women-led portfolio
companies exit an
average of 1
year sooner than all
male teams
SHORTER INVESTMENT CYCLES
Image credit: https://numbermaniacs.com/represent/represent-7.7-on-a-number-line.html
TIME IS A RISK FACTOR AND A COST FACTOR

39. Female-led,
gender diverse teams
return an average of
35% higher ROI
WOMEN-LED COMPANIES RETURN 35% HIGHER RETURNS
https://www.inc.com/kimberly-weisul/boston-consulting-group-female-founders-higher-revenues.html
HIGHER ROI TO INVESTORS

40. CONVENTIONAL VC IS NOT FOR EVERYBODY
LEVERAGE WHAT YOU ALREADY HAVE

41. What do we do
about all this?

42. Consider ALL the options
https://www.amazon.com/Lost-Founder-Painfully-Honest-Startup/dp/0735213321

43. Build the most effective team
Gender diverse teams | Women at the helm
Source: https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet.aspx
† gender diverse leadership teams
Anne Wojcicki, 23andMe

44. Your first
question…
What can I sell to today
to build what I need
tomorrow?

45. Don’t follow others’
paths.
The right questions
illuminate the right
answers
for your company

46. Ask hard
questions
and answer
them
What is the professional
and financial goal?
Who am I building this for?
What do I want to create?
What is my risk tolerance?
What’s the end game?

47. IF YOU ARE
GOING TO
RAISE
CONVENTIONAL
VC CAPITAL

48. You need a game plan

49. Build your hot list

50. Hot List Criteria
• Who has invested in ‘Version 1’
of whatever you are now
building ‘Version 2’?
• Who was the lead partner
who championed that deal?
• Did they have a successful exit?
• They’re on your hot list!

51. Build the relationship

52. Ask business questions!

53. Build your
personal
brand

54. How to
build your
brand
Listen Listen, lurk, learn…
and then comment on powerful sites
Learn Learn where your influencers hang out
Ask Ask for press coverage
Blog Blog, podcast, post
Speak Speak publicly

55. We’re raising $100MM
to fund women-led technology
companies building better ways
to live and work together.
Gillian Muessig | Anne Kennedy
partners@masters.vc