RevenueLoan Blog

February 17, 2011

The cracks widen in the VC funding model

Filed under: news — Christian @ 2:01 pm

A couple of recent articles are showing the ever-widening cracks in the venture capitalist model of funding. Basically, the VC idea is to buy a stake in a company at the lowest possible value, and then sell that stake later on at the highest possible value.

Unfortunately there are a lot of hurdles for a small business owner to leap successfully to get from concept to delivery to sell-out. And the vast majority of startup businesses fail to leap all those many hurdles.

VC territory is shrinking...

And that is why most VC funds lose money, according to Dan Primack at Fortune.

Add to that Mark Cuban’s belief that the current VC funding climate is just an elaborate pyramid scheme.

And finally, pile on the fact that the Wall Street Journal says VCs are pushing into the Angel space just to find deals they can fund!

The picture is pretty clear: VCs are like polar bears, fighting for the last remaining bits of ice in the arctic. Their home terrain is shrinking and they are desperately looking for other territory to conquer.

This illuminates investors favorite feature of revenue based financing: Pay back begins immediately!

If you get a RevenueLoan this month, your first payment is less than 60 days away. That means that the investment (our loan) begins paying off almost immediately, instead of waiting months or years for that big buyout or IPO… and waiting to leap every one of those business hurdles before getting a cent of your investment repaid.

For a traditional Angel or VC style investor who is fighting for an ever-smaller bit of the ice floe, the prospect of immediate returns has got to be a tasty thing…

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