Capital came out of stealth today, with an initial pool of $100M of non-dilutive funding for startups. By connecting to the business systems of their customers, they can offer real-time financial analytics and continuous underwriting in the cloud.
I worked closely with CEO Blair Silverberg at Draper Fisher Jurvetson and was eager to work with him again as he set out to modernize the process of capital formation.
In a startup? You can model you current and projected cost of capital with their simple calculator which generates the chart like the one above.
From the news today:
“After seeing how much founders were giving up when raising venture dollars, Capital designed a place where companies can go to see the viable financing options for their business and acquire the most efficient funding to grow without giving up equity ownership. Capital’s first product, a modern venture debt alternative, replaces legacy offerings with larger checks, no warrants and no dilution for founders producing 2-9x more wealth for them at exit.
Capital delivers the entirety of its investment findings to companies with their financing terms to provide the kind of transparency that companies deserve during a fundraising process. Capital’s analytics dashboard shows them how the funding being deployed generates value for their business. It also identifies improving business trends making new and increasingly cost-effective capital available to them over time.
“Capital is a modern investing alternative built to favor the entrepreneur,” said Steve Jurvetson, Founder and Managing Director of Future Ventures… Blair and his team are expanding the confines of legacy investing to make understanding cost of capital and acquiring funding as easy as shopping for an airline ticket online.”
Capital was founded by Silverberg who spent over four years investing in early-stage businesses at Draper Fisher Jurvetson, along with his co-founders, Csaba Konkoly, an alternative investments expert, and technologist Chris Olivares. Capital’s team of entrepreneurs, investors, engineers, and data scientists have helped grow companies ranging from Renaissance Technologies to Intel.AI to Goldman Sachs.”
And TechCrunch: “Capital’s underwriting technology, dubbed The Capital Machine, determines if businesses have the growth potential necessary for an infusion of debt (by analyzing revenue and other financial considerations), then delivers term sheets within 24 hours. The expedited process cuts out the time-consuming elements of pitching venture capitalists, the company says, allowing businesses to go from zero to $5 million—or more—in a matter of hours.
For companies that aren’t ready for a debt round, or who don’t meet Capital’s qualification, the company is offering access to a free calculator that determines the cost of a company’s capital based on their fundraising and valuation data.
“We are trying to create a business that is the place that all founders go to start their fundraising process,” Silverberg tells TechCrunch. “We just want entrepreneurs to understand that step one in building a balance sheet is to understand your cost of capital. Step two is you can now use that to compare your financing options. We hope we can make this process simpler and more transparent.”
Capital charges a 5% to 15% flat fee on its capital, investing a maximum of $50 million over time. The company has ambitions of becoming a holistic investment bank of sorts”
Business Insider Paywall: “Blair Silverberg thinks he has the answer. The former Draper Fisher Jurvetson investor noticed that tech startups tend to take on significantly less debt in a run up to an IPO than other privately funded companies. So he left the Silicon Valley VC firm to start his own company, Capital, which announced on Wednesday it had $100 million to sink into the next generation of tech startups.
“If you look at the disappointing IPOs recently, that’s not something that happens if you build the balance sheet normally,” Silverberg told Business Insider. “But it happens all the time in venture, and nowhere else. It’s a really unusual financial fact about this growing and accelerating part of our economy.”
“If you look at every IPO and calculate what the founders would have earned with debt, it’s clear as day that more debt is better for them,” Silverberg said. “What we think of as risky venture-backed businesses are really just traditional businesses with traditional models that are using internet and mobile, so they should not be penalized with incredibly expensive, equity-only options. We need new financing models for these new economy businesses.”
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