Solving the Founder’s Dilemma
At Beyond Equity, we’re re-engineering the funding space to create a solution where founders can be both “rich” and “king/queen"
May 10, 2022
'Founders can either be "rich" or "king", but rarely both.'
HBS professor Noam Wasserman in his research to understand the impact of equity financing on founders, concluded that "rich" founders are those who raise quick and substantial capital to build a more valuable company, at the cost of reducing control over their business. On the other hand, "king" founders are those who keep most control and part with less equity, but don't build as valuable a company due to capital shortage. Wasserman believes that founders can rarely be both “rich” and “king”. 14 years into Wisserman’s research, most founders still face the same dilemma: grow fast with a lot of capital and lose control, or retain control at the cost of slower growth.
The obvious question is why, in those 14 years and long before Wasserman’s work, no one found a realistic solution to the founder’s dilemma. A likely answer lies in the lack of innovation in how equity funding works; the process still results in diminishing control held by founders.
At Beyond Equity, we’re re-engineering the funding space to create a solution where founders can be both “rich” and “king/queen”.
We call our new solution Shared Growth Financing (SGF) – it gives the potential to raise the same amount of capital as an equity round, but avoids any kind of dilution or control loss. How? We simply help companies sell a part of their future revenues, instead of selling equity. We’re doing this through a revenue exchange that allows companies to IPO a small percentage of their future revenue, or revenue shares. Founders not only retain full control, they also get a much better valuation compared to equity, considering that investors get an asset with much more money-making potential than equity. This is because investors receive dividend-like pay-outs in the form of a nominal percentage of the company’s future revenues.
Let’s take an example. In a typical equity deal, the investor buys equity shares and along come controlling rights. With SGF, investors now buy revenue shares, get zero controlling rights, but are shielded from fluctuations in the company’s costs (less risk, much more value growth potential) and get dividend-like pay-outs from the revenue shares that they own. In return for the added perks, they give companies a much better valuation than equity financing (e.g., you sell 15% equity to raise £1 Mn traditionally, but with SGF you could sell 5% revenue shares, to still raise £1 Mn).
Join us to finance your growth through SGF, visit: beyondequity.co/signup
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.
Massive Announcement: Beyond Equity partners with Freshworks
Beyond Equity is looking for ways to help entrepreneurs succeed and Freshworks’ software solutions have been heavily requested by our companies from day 0.