Adventure Finance: How to Create a Funding Journey That Blends Profit and Purpose

Description

The venture capital model doesn’t work―at least not for 99% of startups and small businesses. In this 99% are a lot of companies with incredible potential: businesses headed by female founders and those from diverse racial backgrounds, organizations headquartered outside of venture capital hubs, and purpose-driven enterprises that are creating social and environmental impact alongside financial success. Counter to what the press-savvy venture capital world would have you believe, there are a lot of funding options out there for startups and small businesses. Adventure Finance is designed to help you understand some of these options, and walk you through real examples of how other founders and funders have put them to use.  In simple, approachable language, the book breaks down the different types of funding options available from revenue-based financing to recoverable grants to redeemable equity to distributed ownership and more. Through a mix of storytelling and frameworks, based on a decade of research and experience in investing in early-stage companies, this book will give you the ability to determine how each of these structures can contribute to your own funding journey. The goal for this book is to shift the conversation about startup funding and help founders and funders widen the spectrum of “mainstream” investment options in order to make the venture financing world more inclusive and purpose-driven. Acknowledgements Introduction Contents How to Use This Book Pre-reading: Your Journey Map List of Figures List of Tables Part I What If: You Want to Understand Equity and Debt? 1 Helium Health: Our Equity Journey Sensing an Opportunity A Cold Email and a Warm Reception Dye in a Bucket Introducing Convertibility A Simple Agreement? Signing the Deal To YC and Beyond Is Equity Investment Right for You? Founder Funder 2 SOKO: Our Debt Financing Journey Beautiful Products, Ugly System Kuzindua SOKO Building a “Virtual Factory” Exploring Debt Options A Different Type of Growth Capital SOKO’s Strategic Shift Which Type of Debt Options Are Right for You? Founders Funders 3 Powered by People and Equal Exchange’s Trade Finance Journey The World in a Cup The Working Capital Conundrum Order, Ship, Invoice The Gems and Stones of Factoring Solving for Affordability Same Same, but Different? Is Trade Finance Right for You? Founders Funders 4 Unpacking Our Self-Evaluation Who Are We? How Is Our Business Registered? How Do We Make Money and Who Are Our Customers? What Stage of Company Are We? What Are Our Growth Projections? How Mission Driven Are We? How Embedded Is Our Mission in Our Company? Do We Have an Impact Track Record? What Are Our Funding Needs? How Much Do We Need? What Do We Need to Spend It on? How Do We Want to Pay It Back? What Are Our Ownership Expectations? How Involved Do We Want Our Funders to Be? What Type of Funder is Right for Us? What Types of Funders Are There? What Kinds of Resources Can They Provide? What Level of Risk Are They Comfortable with? What Kind of Return Do They Require, and When? Who Are Their Stakeholders? How Does Funding Get Approved? 5 Reflections on Debt and Equity Mixing It Up with Mezz Trading Invoices for Cash Part II What If: You Want to Redesign Risk Capital? 6 Candide Group: Our Structured Exit Journey Learning the Ropes, One Step at a Time The Exit Requirement Baseball, Cricket, the Olympics, and Portfolio Construction A Bumpy Start Joining Forces for Justice Selling Broccoli in a Candy Store Are Structured Exits Right for You? Founders Funders 7 myTurn: Our Redeemable Equity Journey The Emerald City Finding a New Approach The First Cohort The Nuts and Bolts Changing Tack The “Negotiation” Is Redeemable Equity Right for You? Founders Funders 8 Equal Exchange: Our Preferred Stock Journey Deja Brew A Tough Cup of Joe From Dedicated Sippers to Preferred Stock Owners A Latte of Progress Is Preferred Stock Right for You? Founders Funders 9 Provive: Our Revenue-Based Mezzanine Debt Journey Location, Location, Location Show Me the Money Social Mezzanine? A Good Offer? Signing the Deal Back to the Negotiating Table The Golden Years Is Convertible RBF Right for You? Founders Funders 10 Maya Mountain Cacao: Our Demand Dividend Journey A Cacao Way of Life A Sweet Opportunity A Demand What? A Rocky Road Another Round, Please Is Convertible RBF Right for You? Founder Funders 11 GetVantage and VIWALA: Our Revenue-Based Financing Journey From Mumbai to Silicon Valley Frictionless Fundraising? Kicking Dilution to the Curb From India to Mexico Light Touch and Lightning Fast Show Me the Money Is RBF Right for You? Founders Funders 12 Redesigning Risk Capital Founders Funders Part III What If: You Want to Be Innovative with Grant Funding? 13 The Studio Museum in Harlem: Our Program Related Investments Journey Just off Martin Luther Boulevard Charging Ahead A PR What? A Collecting Museum Is a PRI Right for You? Funders Tax Considerations 14 Riders for Health: Our Debt Guarantee Journey Abandoned Vehicles and Long Walks to Clinics Managing Motorcycles and Ambulances in the Gambia West Coast Guarantee for West African Cash Ink on the Paper Rolling Forward Is a Guarantee Right for You? Founder Funder 15 Upaya Social Ventures: Our Recoverable Grant Journey The Power of Stable Jobs and Dependable Wages A Recoverable Experiment From Experiment to Fund Venturing Below 0% Are Recoverable Grants Right for You? Founders Funders 16 IkamvaYouth: Our Forgivable Loan Journey Two Different Worlds Room to Grow An Offer, Rejected An Offer, Accepted A Loan, Forgiven Is a Forgivable Loan Right for You? Founders Funders 17 Trackosaurus: Our Convertible Grant Journey Preschool 2.0 Tablets for Toddlers? A Prototype, an Accelerator and a Workshop Grants That Convert? A Decent Proposal Is a Convertible Grant Right for You? Founders Funders 18 Innovative Grant Funding Recoverable Grants Versus Forgivable Loans Convertible Grants Part IV What If: You Want to Link Financing to Impact? 19 Michael and Susan Dell Foundation: Our Interest Rate Rebate Journey Impacting Education in India The Road to a Rebate Getting Good Marks Tweaking the Model Is an Interest Rate Rebate Right for You? Founder Funder 20 Clinicas del Azucar: Our Social Impact Incentives Journey A One-Stop Shop SIINC-ing Incentives Meet Me at FLII? A Rousing Success Are SIINCs Right for You? Founders Funders 21 My Outcomes-Based Financing Journey A Social Impact Bond Primer From Dreaming Spires to Endless Sunshine Scoping Out the Possibilities A Lego Building Block Costly and Complex Is an Impact Bond Right for Me? Founder Funder 22 Linking Financing to Impact Cost of Capital Funding Disbursement Ownership Convertibility Part V What If: You Want to Redesign the Entire Funding Process? 23 Code for All: Our Crowdfunding Journey Calling All Coders Reporting to Bootcamp Tapping the Crowd Pushing Beyond Portugal Is Crowdfunding Right for You? Founders Funders 24 Village Capital: Our Community Led Capital Journey Small Capital, Big Change A Company of Its Own Pushing Deeper Is Community-Led Decision Making Right for You? Founders Funders 25 Cal Solar’s Journey to Becoming a Worker-Owned Co-Operative Taking the Reins Interrogating the Options Five Plus Four Ownership and Resilience Is Employee Ownership Right for You? Founders Funders 26 Redesigning the Entire Funding Process Founders Funders 27 Embedding Mission into Contracts Type of Funding Use of Funding Ownership Default Provisions Rights Conclusion Part VI What If: You Want to Plan Your Journey? 28 Who Are You and What Do You Need? Who Are We? What Is Our Business Registered as? How Do We Make Money and Who Are Our Customers? What Stage Company Are We? What Are Our Business Growth Projections? How Mission Driven Are We? What Is Our Mission and How Embedded Is It in Our Company? Do We Have an Impact Track Record? What Are Our Funding Needs? How Much Funding Do We Need? What Do We Want to Spend Our Funding on? Do We Have Any Assets to Use for Collateral? How Do We Want to Pay It Back? What Are Our Ownership Expectations? What Kind of Funding Are We Going to Need in the Future? How Involved Do We Want Our Funders to Be? 29 What Type of Funder Is Right for You? Do You Fit Their Funding Thesis? Are You Mission Aligned? Who Else Have They Funded and What Do Those Founders Have to Say? What Type of Resources Can They Provide? What Level of Risk Are They Comfortable with? What Return Do They Require? When Do They Require that Return? Who Are Their Stakeholders? 30 What Type of Funding Is Right for You? What Are My Options? Conclusion 31 Glossary Index