Can We Use Fintech To Innovate Venture "Style" Capital?

Written by
Ross Andrewsarrow icon

Can We Use Fintech To Innovate Venture "Style" Capital?

Written by
Ross Andrews

For those of you that know me I am pretty passionate about helping founders and startups succeed. So why did we call is Venture "Style" Capital? Well too often when we hear Venture Capital, we jump straight to those large equity priced rounds in what both the startups and investors hope are exponential curve growth businesses. As startups and the recurring revenue/subscription business model has become better understood and more mature, the ability to innovate and find other forms of lending and financing startups will ultimately follow. With data and fintech innovation, can we build a future of new Venture Capital that is tailored to different businesses just like a big bank backs corporations? Can we use data to power these new funds and give them the tools to create innovative new financial products to support founders building the future.

Fintech has made tremendous strides to innovate consumer financial products to help democratize access to banking and financial products. SoFi helped individuals refinance debt, Chime made getting a checking and savings account easy, Trigg made credit cards in Brazil (still a developing nation) far more accessible. Data has enabled all of these companies to better understand consumers financial patterns and tailor products and solutions that drive adoption and empower personal financial success. So how can we innovate similar solutions for startups and investors?

The solution lies in the data. The last decade has seen tremendous growth in the systems that help manage and capture financial and operational data about startups. Stripe tracks subscriptions and payments, Xero manages the books and makes accounting easy, Carta manages the cap table, Gusto makes payroll a breeze. So what happens if we take all of this data and enable capital providers and startups to have better insights into their business? We can track things like revenue growth, margins, cash burn, vesting schedules, revenue retention, financial forecasting and a whole bevy of other financial and operational metrics.

Imagine a venture investor and a startup founder sitting down and realizing that they have a profitable segment of customer where churn is almost non-existent and revenue retention is off the charts? They use that insight to tailor an equity investment combined with a term loan underwritten by that health revenue to give the founder access to capital to grow while preserving some of the equity in their business while still offering their venture partner long term equity upside but now with the short-term payout from the loan as the business continues to grow. Using data, investors can tailor solutions for startups that combines the right type of capital to power the growth of a startup while still driving returns for the capital providers. Through a shared platform, Venture Capital and Venture Debt funds could better collaborate with a founder to mix and match these financings. With a single ledger of capital transparency we can make better and most importantly, quicker decisions. This flexibility is a key factor in our fast paced world, investors will need to move quickly and innovate to provide founders with the financing they need.

Let's spin the flywheel too. If we can innovate and use data to build the tools founders and investors need to better understand and finance their businesses it will empower creative minds to take that data and create new and innovative ways for capital providers to support founders and their startups. If you have thoughts or ideas around innovation in investing or venture capital, reach out to us at hello@talkinsaasy.com, we would love to hear your thoughts/ideas!

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