VC-backed tech startup success often feels like the lottery — a few highly visible winners in a winner-take-all game. But there is a much larger phenomenon in the small business economy at large. It is diffuse and distributed, more of a statistic than a story. The American Dream and Chinese Economic Miracle have helped many millions of people work their way out of poverty, and they were enabled by policies allowing for entrepreneurial freedom, from Silicon Valley to Shenzhen. It is not a story of a hero; it’s a system of policies.
Our corporate economic system feels much more like the lottery than it should. Companies with abundant sales data should be able to finance their growth inexpensively — if capital providers could share the same internal visibility as the CFO, and if analytics could drive the financing decisions. Now that’s a Capital Idea!
Turning to TechCrunch today:
“Capital has built an AI-based platform called “The Capital Machine” that ingests details about your company to provide tips on how to optimise it and then provides non-dilutive financing for it. When Capital launched last October, it also announced $100 million on its balance sheet to distribute as loans.
Before founding Capital, Silverberg worked closely with Steve Jurvetson as an investor at DFJ, and in that capacity got a lot of experience with the equity-based investment model.
That wasn’t an entirely happy picture, though: Silverberg could see that for every company that got funded there were so many more that couldn’t be considered, either because of sheer volume, or because of investment theses that VCs are using, or some kind of “investment bias” as Silverberg described it.
On top of that, even when money was there for the taking, founders were giving up equity to take it, in some cases so much after several years and several rounds of funding that one had to question if that was always the best route to take.
His idea was to use the advances of AI, software-as-a-service and the surge of interest (and, I would add, trust) in fintech and running financial services online to build something that could give founders and CFOs of smaller startups an alternative to consider, which took into account the fact that done right it could be a win-win for financiers and those getting funded.
And from the Capital Release:
“We founded Capital because we wanted to solve a massive problem in the fundraising process, which my own portfolio founders faced when I was a venture capitalist at Draper Fisher Jurvetson,” said Blair Silverberg, CEO of Capital. “The traditional fundraising process takes too long, is opaque to founders and early owners, and can be subject to biases. We believe that Capital offers a better way forward, with a fairer, faster, and more transparent private market process for accessing capital based on AI and direct business data.”
Capital is at the center of several key trends in fintech and machine learning. Several fintech platforms in recent years have been offering online lending to SMBs, with many of the companies struggling in the aftermath of the COVID-19 crisis. Capital is offering a tech-first approach to institutional capital raising for the first time, making the fundraising process faster and more transparent for sophisticated companies with more than $5M of revenue, whether venture-backed or bootstrapped.
Steve Jurvetson, co-founder of Future Ventures, added, “when I started in the venture industry in the mid-1990s, it was small, with $7B invested in 1995. Today $140B is invested each year in the United States with a similar amount in China. The industry has grown and matured, but its capital structure has not. Equity is appropriate for research and development – say, inventing a new rocket – it is not optimal for scaling sales and marketing or a myriad of other types of investment that are predictable and financed non-dilutively in other industries. The transparency created by The Capital Machine can move our industry forward and remove bias from the system as well.”
Capital’s home page.
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