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Inclusive capital means more flexible terms and more diverse founders

ImpactAlpha, Dec. 10 – The venture capital model has fostered a culture of growth at any cost – and of founder homogeneity. Pitchbook reports venture capital investment in female-founded startups reached an all-time high in 2019… to 2.8% of invested capital.

Enough investors are offering alternatives to the venture capital model that a trade group is forming. At Art Basel over the weekend, Nathalie Molina Niño of announced Builder Capitalist, a trade association for investors using revenue-based finance, holding companies and other structures “in service to the success and health of the companies.” Joining O³ on the roster are the roster are BlueIO and Franklin Heritage, a holding company focused on tech and manufacturing.

Molina Niño shared news of the association at the Inclusive Capital Summit, hosted at the Miami art festival by Village Capital and UBS. The two firms are developing a directory of investors using such alternative and inclusive structures, built on Village Capital’s Abaca platform. San Diego-based Founders First, which last month closed $100 million in debt financing from Community Investment Management, is among the raft of funds offering revenue-based financing for companies with recurring revenues (see, “As unicorns stumble, investors warm to revenue-based financing for ‘zebras’ and ‘Clydesdales’). 

Underestimated founders

Investors in attendance included Backstage Capital, Impact America Fund, Lightship Capital and Next Wave Impact. Harlem Capital’s $40 million fund closing last week, and another $42.5 million for Plexo Capital, signal a growing awareness that women and minority founders are undervalued. 

Capital innovation

Kauffman Foundation in early 2020 will invest in three fund managers selected for its Capital Access Lab, a $3 million pool of capital for funds deploying revenue-based investing, performance-based equity, and employee stock ownership and other new models for founder ownership and investor liquidity.

Omidyar Network, Kauffman and Libra Foundation have backed Zebras Unite, the network of startup founders that “balance profit and purpose, champion democracy, and put a premium on sharing power and resources.”

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