In traditional technology startup funding there are many players. While everyone hears about Venture Capitalists signing over checks in exchange for equity, many don’t know the broader picture. These VCs enter at one of many stages and participate in a host of different ways. Some are hands-on, some are hands-off. Many VCs do what is often cheekily referred to as the “spray and pray” technique, where they invest in a mass of startups and rely on a few champions to carry the fund. This is a wholly effective template, but it leaves many companies left in the wake.
What doesn’t reach the masses is the large amount of Venture Debt these companies take on in the process. When these companies trade equity for capital, their upside is greatly reduced. Every share they give away dilutes their own exit potential. When their babies become unicorns, they want to get their turn to ride! So instead of accepting further dilution, the company will enter into a relationship with a Venture Debt provider or a Venture Bank. (We will touch on the benefits of each in a later blog post.) “Hey! Great news! We own the same amount of the company as we did, but now we can hire that next developer, salesman, marketer, or keep the lights on until that big renewal comes in. And, once we grow a little more, our VC-backer will come in with a follow-on!”
The company continues growing, but not as fast as anticipated. The VC backers are not interested in a follow-on and the debt payments continue to grow. Debt providers are getting anxious and their equity investors are nowhere to be found. Now deemed a Special Situation by the bank, this company has become “orphaned”.
Enter the Stage Fund.
We work with the above parties to reach a mutually beneficial arrangement by taking the reins of the company and working to stabilize it and put it back on the path to growth and success. Utilizing our shared services and years of turnaround experience, we formulate and implement a strategy. Every company is different; therefore, every strategy is different. There is no situation too special for our team.
We are actively accepting new opportunities; don’t hesitate, reach out today.