Mainstream VC firms are entrenched incumbents, with little innovation outside of their legacy business model. Traditional VC firms have teams of scouts and partnerships with accelerators set up to find companies those they hope will be their most profitable investments: startups they believe will achieve the greatest outcome. The outcome being an exit, as quickly as possible, to a bigger firm, or an IPO where they can offload their early shares to the public.
Sure, firms have begun differentiating themselves by offering value adds like mentorship or industry knowledge. But even that has become saturated. Almost every VC out there today claims to offer capital to undeserved industries, or mentorship to new founders. But let’s face it, the industry focuses only on short-term gains over long-term value creation, and fails to truly support the needs of early stage companies. These issues have led many to call for a fundamental shift in the way the venture capital industry operates. Including us at Revtap.
Of course, venture capital firms are under pressure to deliver returns to their investors within a relatively short time frame, which can incentivize them to focus on investments that offer the potential for quick returns rather than those that are likely to create lasting value. This can lead to a lack of support for companies that are working on important but difficult or long-term problems, and can ultimately hinder the growth and success of the technology sector as a whole.
But at the same time, the venture capital industry has been criticized for failing to support the needs of early stage companies. Many venture capital firms are reluctant to invest in companies that are at the very earliest stages of development, which can make it difficult for founders to get the support and funding they need to get their businesses off the ground. This can be particularly challenging for founders who are working on cutting-edge technologies or who are tackling difficult or complex problems, as these types of ventures often require more support and investment in the early stages.
And finally, VCs take a significant amount of equity in the companies they invest in, which can have a number of drawbacks for founders and other stakeholders. But there is little alternative.
In a 2021 study of nearly 8000 financings (study found here), over 80% of early stage (Seed through Series A) companies surveyed were Post-Revenue. This is the absolute best proof of concept out there. Companies generating revenues have proven the model and in most cases just need an influx of capital to take that model to the next level. So what if there were a way for these companies to obtain this capital without losing control over their business? A model where longer term success is the desired outcome, versus a short term exit strategy?
Revtap is a marketplace where companies can leverage their success, issuing shares in their revenues, rather than equity. Like an IPO, but without the need for the rigorous listing requirements of public markets. Companies list shares in their revenues to investors, who receive a share of the company’s cash flow each month. As the company revenues grow over time, the return to investors increase, giving the potential for higher dividend returns, and capital appreciation in the underlying revenue share.
A truly revolutionary disruption to traditional venture capital. Equity free. But long term gains as the ultimate outcome, not short-term exit.
Revtap takes only a small share of a company’s revenues, typically 3-5%, and pays this out to investors as a dividend. These revenue shares are securitized, and traded by the public using exempt offering regulations under the Securities Act. Revenue share dividends increase as company revenues grow; but at the same time, the underlying shares, traded on the Revtap marketplace, increase in value as the dividend yield increases. So investors are in it for the long-haul; committed to the company’s long term success, rather than pushing for front loaded growth to attract an exit.
The venture capital industry is in need of disruption. An old-school legacy model without innovation. This will require a shift in the way the industry operates, and Revtap is in the unique position to do this. A marketplace for revenue sharing, opening up investments into early-stage companies to investors world wide. Revtap offers a commitment to long-term value creation, and more support for early stage companies, and helps foster innovation, support the growth of the technology sector, and ultimately deliver better returns to investors.
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