revenue-based financing

H-1B worker advice, managing remote teams, pitch deck teardown • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in capital gains, EC roundup, Pitch Deck Teardown, revenue-based financing, Startups, VentureNo Comments

According to layoffs.fyi, more than 23,000 tech workers have been laid off so far this month. For comparison, the site tracked 12,463 layoffs in October. Facebook’s parent company Meta announced the first major job cuts in its history this week, eliminating 11,000 jobs. Like Twitter, Stripe, Brex, Lyft, Netflix and other tech firms based in the Bay Area, many of the employees impacted are immigrants here on worker visas. An unexpected layoff introduces an element of chaos into anyone’s life, but when an H-1B worker loses their job, a very loud clock starts clicking: unless they can land a new position or change their immigration status within 60 days, they’ll need to leave the country. And because tech companies at every size are enacting hiring freezes and planning more cuts, their ability to live and work in the U.S. is suddenly in question. Earlier today, I hosted a Q&A with immigration lawyer Sophie Alcorn for H-1B workers who have been laid off (or think they might be). “You either get a new job, you leave, or you figure out some other way to legally stay in the United States, but you have to take some action within those 60 days.” Start looking now for new opportunities, she advised, as it will take new employers time to submit paperwork to U.S. Citizenship and Immigration Services. Full ZebethMedia+ articles are only available to membersUse discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription “The best-case scenario would be that this new company files your new change of employer petition and USCIS receives the paperwork on or before the 59th day since your last day of employment,” said Alcorn. “It takes at least three weeks to prepare everything,” which means candidates and employers must move quickly as the days count down. “You probably need a signed offer around day 33,” she said. A lot of the information Alcorn provided was just as relevant for hiring managers as it was for workers who’ve been laid off: any number of factors can combine to further complicate a process that’s already hard to puzzle out. For example, what happens to H-1B workers who get laid off while they’re out of the country? Can getting married actually solve an immigration problem? (Definitely not!) Because so many people have been laid off during a season when it’s traditionally hard to land a new position, I asked Alcorn whether she thought the layoffs would cause an exodus of tech talent from Silicon Valley. “The American Dream is still really important to immigrants,” she said. “A lot of people are going to fight to find a way to stay here, even if it’s not necessarily in the in the Bay Area with the high cost of living. They still want what America represents and they’re going to reevaluate their relationship with Big Tech and the nature of work.” 3 tips for managing a remote engineering team Image Credits: Inok (opens in a new window) / Getty Images I once managed an office where the CEO and I were the only two people who weren’t on the engineering team. We occupied a pod in a co-working space, so we all sat around one large table. Outside of our group lunches, the developers rarely spoke to each other, as most communication took place via Slack, Jira and GitHub. Today, that team works remotely. In a post for TC+, entrepreneur and angel investor Kuan Wei (Greg) Soh shared his top suggestions for managing distributed engineering teams, which includes mandatory standups and at least three hours each day when everyone is available to chat. “We expect Slack messages to be replied to within an hour, that everyone be reachable if we call them, and that we would work responsibly with our assigned partners,” he says. Use IRS Code Section 1202 to sell your multimillion-dollar startup tax-free Image Credits: BrianAJackson (opens in a new window) / Getty Images Founding teams usually select a corporate structure like an LLC or S-Corp, but those who hope to exit for $10 million for more should consider starting up as a Qualified Small Business (QSB) C-Corporation, advises tax attorney Vincent Aiello. Under IRS Code Section 1202, founders who hold QSB stock for five years or longer will be exempt from paying capital gains tax after a sale. “It constitutes a significant tax savings benefit for entrepreneurs and small business investors,” Aiello says. “However, the effect of the exclusion ultimately depends on when the stock was acquired, the trade or business being operated, and various other factors.” Revenue-based financing: A new playbook for startup fundraising Image Credits: Cocoon / Getty Images (Image has been modified) Revenue-based financing can make early-stage startups less dependent on investors so they can hold onto more equity. With terms that usually range from 12-24 months, many teams use these funds for short-term projects, like sales and marketing campaigns. “Because the return on these activities may be higher than the cost of revenue-based financing, startups should use revenue-based financing to fund initiatives that will bear fruit soon,” advises Miguel Fernandez, CEO and co-founder of Capchase. Pitch Deck Teardown: Syneroid’s $500K seed deck Image Credits: GPC Smart Tags (opens in a new window) Stolen-vehicle recovery systems have been available for decades, but a lost pet has higher emotional stakes. According to Syneroid, a startup that makes smart tags, 10 million pets are lost each year in the United States, but “less than 30% are returned home.” After raising a $500,000 seed round at a a $3.9 million valuation, the company’s founders shared their 12-slide pitch deck with ZebethMedia for a review. “No information has been redacted or omitted,” writes Haje Jan Kamps.

A new playbook for startup fundraising • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in Column, EC Column, fundraising tactics, revenue-based financing, startup financing, Startups, VentureNo Comments

Miguel Fernandez Contributor Miguel Fernandez is CEO and co-founder of Capchase, which provides non-dilutive financing to SaaS and comparable recurring-revenue companies. More posts by this contributor Use alternative financing to fuel VC-level growth without diluting ownership A few years ago, founders only had two options when starting a company — bootstrap yourself or turn to VC money, and they would use that money primarily to pursue growth. Later on, venture debt started to gain prominence. While non-dilutive, its problems are similar to that of VC equity: It takes time to secure, involves warrants, isn’t very flexible and not every startup can get it. But in recent years, more options have become available to founders. Most startups can now avail non-dilutive capital, and purpose-specific financing has entered the fray. While venture capital remains the most popular avenue for startups, founders should take advantage of all the financing options available to them. Using an optimal combination of capital sources means using cost-effective, short-term funding for imminent goals, and more expensive long-term money for activities with uncertain returns on the horizon. What is revenue-based financing? Let’s define it as capital provided based on future revenue. While venture capital remains the most popular avenue for startups, founders should take advantage of all the financing options available to them. So what is unique about revenue-based financing? Firstly, it is quick to raise. Compared with the months-long process usually involved with other forms of equity or debt financing, revenue-based financing can be set up in days or even hours. It is also flexible, meaning you don’t have to withdraw all the capital up front and choose to take it in chunks and deploy it over time. Revenue-based financing also scales as your credit availability increases. Usually, there’s only one simple fee with fixed monthly repayments. How should startups evolve their financing playbook? To optimize fundraising using different sources of capital, startups should think about aligning short- and long-term activities with short- and long-term sources of funds. Revenue-based financing is shorter term in nature, and a typical term ranges between 12 and 24 months. Venture capital and venture debt are longer-term capital sources, with a typical term of two to four years. A startup’s short-term activities may include marketing, sales, implementation and associated costs. If a startup knows its economics, CAC and LTV, it can predict how much revenue it will generate if it invests a certain amount in growth. Because the return on these activities may be higher than the cost of revenue-based financing, startups should use revenue-based financing to fund initiatives that will bear fruit soon.

FlapKap provides revenue-based financing to e-commerce brands in MENA, gets $3.6M seed funding • ZebethMedia

By zebethcontrolPosted on October 12, 2022Posted in Commerce, revenue-based financing, StartupsNo Comments

Recent research suggests that the e-commerce market in Saudi Arabia, UAE and Egypt account for a combined $21.4 billion and is projected to grow by more than 50% to $33.3 billion in the next three years. And as MENA shoppers increase their commerce spending, it is increasingly becoming imperative for online stores to position themselves to take full advantage of the growing phenomenon. FlapKap, using its revenue-based financing platform (RBF), is helping these stores solve the growth-destructive challenges that emerging online stores encounter. The company, which allows e-commerce businesses to scale and grow by targeting businesses with limited bank or venture financing access, is announcing that it has raised $3.6 million in seed funding to supercharge its efforts. Ahmad Coucha and Khaled Nassef founded FlapKap; Sherif Bichara and Adel Hodroj are on the founding team. It was during Coucha’s time at Kijamii, a digital agency upstart he launched in 2014 that conducted projects for Fortune 500 companies, that the CEO noticed late payment and access to working capital issues businesses, including his, faced. For instance, most of Kijamii’s clients always paid late, sometimes 30 to 120 days from when a sale closed. “We always thought to ourselves that this should be the exact opposite. Big clients with massive amounts of cash shouldn’t be the ones that get super flexible payment terms from the agencies; it should be the small and medium enterprises struggling for cash and growth. These should be getting the support,” CEO Coucha told ZebethMedia. In 2021, Coucha spent some time in the U.S. and witnessed the rise of revenue-based financing platforms in the country and the West, including Clearco and Wayflyer. The idea to replicate a similar operation for MENA existed, hence the launch of FlapKap. Yet, while most revenue-based financing companies have prevalent SaaS and e-commerce clientele, FlapKap strictly serves e-commerce platforms. E-commerce operations have flexible payment terms that suit FlapKap’s business as they spend a lot on advertising, marketing and inventory, recurring activities responsible for these brands making late payments or taking loans to remain operational. “SaaS is still growing in its early stage in the Middle East, but it’s not yet sizable. On the other hand, e-commerce is booming in all parts of the world, and is underserved by the current finance infrastructure in Africa,” he added on his company’s preference to pick e-commerce brands. FlapKap’s business model is one where it finances e-commerce platforms’ expenditures and recoups its money when these brands pay back a percentage of their revenues until repayment is complete. In other words, FlapKap adds a fixed fee — split to be paid in percentages from their revenues within a specific timeframe — to whatever amount its clients access on its platform. FlapKap claims to have helped generate more than an 85% increase in revenue and over 70% increase in net profits within a few months for its customers. The revenue-based financing company for e-commerce platforms, which claims to be growing 300% quarter over quarter, also mentioned that it has partnered with tens of clients from Egypt and UAE in six months. Some include Dresscode, Raw African, Palma and Tam’s Shoemaker. FlapKap has also recently integrated its AI-based insights and financial data analytics with Shopify, WooCommerce, Facebook and Google, and expects to strike more partnerships, it said in a statement. “Aside from the financing solutions we offer our partners, we also give them other value-added services to help them go further. So we always like to position ourselves as a growth partner; we’re not just financing,” said the chief executive. “We want to drive growth. We have a model work in progress built for identifying the clients’ growth potential; it’s a model we are currently building and getting enhanced daily by the data we’re collecting.” This latest capital injection comes six months after FlapKap’s pre-seed raise and the investors on board are strategic for FlapKap. QED, for instance, has invested in some of FlapKap’s global counterparts, such as Wayflyer and Fairplay. The fintech-focused venture capital firm used Bolt, its arm for investments in the Middle East, to complete the transaction. There’s also Egyptian government-backed Nclude, legacy Pan-African investor A15 and Outliers. “I’m excited to be building FlapKap along with them,” said Coucha. “I think they are not just investors; they are real partners in what they’re doing for us now and expected to do in the future as well,” said Coucha. With the new funding, FlapKap plans to increase its capacity to help more e-commerce businesses in the MENA region scale and maximize their growth potential, as well as consolidate its position as the region’s leading revenue-based financing player. The company aims to solidify its presence in Saudi Arabia, the UAE and Egypt by offering e-commerce businesses the ability to scale their inventory and digital ads now, while flexibly paying later. Gbenga Ajayi, a partner at QED, commented on the investment: “Having invested and worked with similar companies to FlapKap across other regions such as Europe and Latin America, we are confident this team can attain similar success.”