Flexible VCs With Structures Between Equity and Revenue-Based Investing

(co-written with Jamie Finney, Founding Partner at Greater Colorado Venture Fund. His work on VC and small communities is at greatercolorado.vc/blog. )

This essay is part of a series on alternative VC:
I: Revenue-Based Finance: a new option for founders who care about control
II: Who are the major Revenue-Based Finance VCs?
III: Why are Alternative VCs investing in so many women and underrepresented founders?
IV: Should your new VC fund use Revenue-Based Finance?
V: Should you raise venture capital from a traditional equity VC, Flexible VC, or a Revenue-Based Finance VC?
Revenue-Based Investing: State of the Industry 2020
VII: Flexible VC, a new model for early-stage capital-efficient growth companies

VIII: The Leading Flexible VCs, with structures between equity, debt, and Revenue-Based Finance

In our previous essay, we introduced the concept of Flexible VC: structures which allow founders to access immediate risk capital while preserving exit and ownership optionality. We list here all of the active Flexible VCs we have identified, broken into these categories: revenue-based; compensation-based; and blended return streams. Please contact us if you are deploying capital using this strategy.

Revenue-Based Flexible VCs

These investors are paid back primarily based on a percentage of revenues.

Capacity Capital, based in Chattanooga, Tennessee, was launched in 2020 with a primary focus on the Southeast. Jonathan Bragdon, CEO, describes Capacity as “a team of founders-turned-funders making non-dilutive, founder-aligned investments of $50-$300k in post-startup, post-revenue businesses planning to 2X revenues in 12-24 months. Investments are typically in exchange for a capped, single-digit revenue share and a right to equity under certain circumstances. If the company sells or raises enough capital, the investment converts into an agreed-upon percentage of equity. If the company grows without raising additional equity funding, founders redeem most of the equity right, based on a pre-agreed return amount. With a portfolio that includes food, tech, and services, the fund is industry-agnostic and focused on the overlooked and underrepresented with high-margin business models.

Jonathan sometimes refers to their investments as “micro-mezzanine” because “mezz is typically structured as a contractual periodic payment, with some equity-like upside, but subordinate to other debt… so most lenders look at it like equity. But, it is typically shorter term with fewer control mechanisms than equity (i.e. not VC). I wanted [a term for] something similar (between debt and equity) but on an extremely small scale.”

In addition to a fund, the overall Capacity organization provides direct mentorship, consulting and connects founders to a broad network of talent, diverse forms of capital, and existing resources focused on the post-startup stage of growth. The founders, LPs, and venture partners have a long history in local startup ecosystems in the Southeast including LaunchTN, The Company Lab, CoStarters, and several other regional funds and resources.

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Greater Colorado Venture Fund (GCVF) is a $17M seed fund that invests in high growth startups in rural Colorado using equity and Flexible VC structuring. A typical GCVF Flexible VC investment is $100k-$250k for up to 10% ownership, of which 9% is redeemable, with a sub-10% revenue share and 12-month-plus holiday period. GCVF specializes in providing critical support to founders based in small communities, while connecting them to an unfair network well-beyond their small-town headquarters. 

GCVF is pioneering the future of venture capital and high growth startups for all small communities. With Colorado as an ideal pilot community, the GCVF team has helped grow multiple staple initiatives in the rural Colorado startup ecosystem, including West Slope Startup Week, Telluride Venture Accelerator, Startup Colorado, Energize Colorado Gap Fund, and the Greater Colorado Pitch Series. Recognizing the need for creative investment structures in their Colorado market, they cofounded the Alternative Capital Summit, creating the first community of Flexible VCs and alternative startup investors. 

They share their learnings on Flexible VC and pioneering rural startup ecosystems on the GCVF blog.


Reformation Partners is a new  investment firm founded by three partners who spun out of FirstMark Capital ($3B AUM firm which was an early investor in Shopify, Pinterest, and Riot Games). According to a recent interview with Founding Partner Andrew Oved, Reformation invests in SaaS (vertical and application software) and consumer product businesses that have achieved $1M-$5M in annualized revenue, while operating capital efficiently. Reformation Partners Fund I is a $20M fund with check sizes ranging from  $500k-$1.5M; the firm targets 7.5%-20%  initial ownership. They aim to provide founders with maximum optionality, flexibility, and alignment by aligning around profitable growth and realistic M&A opportunities . More on Reformation and their insights can be found on their Medium blog.


Next Wave is a venture studio which uses the Simple Agreement for Future Equity with Repurchase (“SAFER”), “a new financial instrument designed to give investors the right to future shares of a company and periodic returns based on the company’s revenue. Safer strikes a balance, ensuring early investors see structured returns, while founders and teams retain more of their equity.”


UP Fund is a rolling venture fund launched in Q4 2020, and part of global SaaS accelerator Upekkha, based in India. Prasanna Krishnamoorthy, Managing Partner, Upekkha Value SaaS Accelerator, said, “We are the first fund which combines an Angel List rolling fund structure for making LP access widely available, while using the variable VC model of giving founders the option to buy back their equity at a later stage, ensuring founder optionality. We plan to raise $2.5m per year and we plan to invest about $100k in 20 startups per year. We have a total of 4 Partners and 6 other team members.”

“Upekkha works with SaaS founders of Indian origin that use the India advantage for creating capital efficient growth. We created this as we witnessed hundreds of SaaS founders from India being shoved into the unicorn path as default, and over 95% being robbed of meaningful outcomes as they are pushed to build Vanity Saas businesses. The accelerator, along with the fund, gives a network mindset & resources to founders to build a capital efficient business that grows and creates wealth for founders and investors. This way of building the business we call ‘Value SaaS’ and the funding itself as optionality funding. In 3 years since founding the Accelerator, we have worked with 61 startups. One third of them are growing over 50% y-o-y. 4 from our first year cohort of 10 crossed $1m ARR with less than 15% equity dilution while growing 2x; all are operationally profitable. We have built a network of over 150 Indian SaaS founders that plays a crucial part in growth of founder mindset and startups. We are a tight knit tribe and measure our founder experiences through NPS; it averages above +85.” 


Versatile Venture Capital invests in early-stage companies which help investors succeed. For example, we’re past investors in alternative data, investment research, back-office tech, marketplaces for private companies, and salestech to help gather assets. We are an aggressive user of technology internally to manage the firm and make better investments.

We manage PEVCtech, a community for family offices, private equity funds, and VCs focused on using technology and analytics to make better investments in private companies. We share insights on technologies, data, and processes that generate alpha. We also manage Founders’ Next Move, an invite-only, no-cost community for founders researching their next move: launching a new companyangel investing/becoming a VCscouting for investments; buying a companyjoining boardsconsulting; participating in expert networks; serving as an interim executive; or just getting a job.

We have built out a suite of services to help our companies succeed, including an exclusive database tracking free accelerators, Fortune 500 freebies, free consultinggovernment support, the best startup advicediscounted services, and special free resources for student founders and impact startups.

Our team has a history of investing in diverse and underrepresented founders. We have the flexibility to invest using both traditional and alternative VC structures.

David Teten, Versatile’s founder, was previously a Partner with HOF Capital (now >$1.2b AUM) and ff Venture Capital (now >$289m AUM), two early-stage New York VC firms. He is also Founder of HBS Alumni Angels of NY, the largest angel group on the East Coast, and a serial fintech entrepreneur with two exits. He writes periodically at teten.com.


Tech Tour/Results Junkies is led by the husband and wife duo of Paul Singh and Dana Duncan. They have spent multiple summers putting on the “Tech Tour”– traveling around North America investing and speaking in tier II and III cities (excluding 2020). As of summer 2017, about one third of their investments were with the Indie.VC V2 structure. 

Compensation-Based Flexible VCs

These investors are paid back using a formula driven by the founding team’s income.

Chisos. Will Stringer, Founder, based in Santa Monica, CA, reports Chisos “invests across the U.S. in idea-stage and side-hustle founders using a Convertible Income Share Agreement, or CISA. Check sizes range from $15k – $50k. A Chisos investment typically augments or replaces friends and family capital, but can also be utilized as early-stage growth capital for certain types of companies. The income share agreement is a personal obligation of the founder and income share payments continue regardless of business outcome. This characteristic enables investment at the riskiest stage of business formation and growth. Chisos made a number of investments during a Spring 2020 pilot program and is currently raising a fund under Reg D 506(c) to make 400-500 investments over the next 2-3 years.

“Standard terms on a $30k investment include a 10% founder income share with a 2.0x repayment cap and ~3% equity. As income share payments are made, founders will claw back up to ⅔ of the Chisos equity. Founders repay Chisos with a percentage of personal income ONLY when that income is above $40,000. The repayment cap can also be reduced through accelerated payback or a successful equity fundraise. An early Chisos portfolio company, Re-Nuble, Inc. recently raised $1.1mm to transform food waste into hydroponic nutrients for soil-less farms. More details on the mechanics of the CISA can be found here and here.”

Horizan VC. Jonathan Sun, General Partner, based in London, England, started Horizan VC to provide a very similar formula to Chisos but for the UK (and eventually the EU): “investing in idea-stage and side-hustle founders using a Convertible Future Earnings Agreement (CFEA).” Check sizes range from £10K-£30K. Like Chisos, Horizan VC augments or replaces friends and family capital. Similar to the income share agreement, the future earnings agreement (run by Stepex) is to the founder, which he/she repays if either the founder shuts down the company before reaching qualifying round and gets a full time job, or chooses not to raise a qualifying round and become a stable, revenue generating business. This characteristic enables investment at the riskiest stage of business formation and growth. Horizan VC has made 5 investments so far, including ZIM Connections, Gigbridge, ila Generation, Kinicho and GoCaptain.

“Standard terms on an investment are: if a founder earns £2500 or more per month in his/her personal income, he/she pays 10% of his/her monthly income until either he/she pays 1.5x in 5 years or 2.0x in 10 years. If below then he/she pays nothing. If a founder raises a qualifying round of £700,000 or more, then his/her FEA gets cancelled and the unpaid amount converts to equity at a 20% discount with a £5M valuation cap.” More information here.

Blended-Return Flexible VCs 

These companies are paid back based on a formula driven by multiple factors, typically revenues, profit, and/or compensation.

Collab Capital. According to Managing Partner Justin Dawkins, Collab Capital, based in Atlanta, is “setting out to disrupt the wealth gap by investing in Black founders building innovative, high growth companies.” With partners Barry Givens and Jewel Burks Solomon, the team plans to “fill a gap in access to capital and access to networks for Black entrepreneurs.”

“We identify great innovative companies with solid business models and help them determine the right growth path for their businesses. In our model, we initially invest $350-$500K, which gives enough runway to understand if the business should pursue a venture scale path or if they should focus on the profitability path. If we determine the business has venture scale potential, we will help them raise subsequent funding and we will convert into that subsequent round at a predetermined equity target. If we determine the business can grow profitability without raising subsequent rounds, we will employ our profit-sharing agreement. Our profit share agreement allows founders to redeem their equity (every multiple returned redeems one percentage point of equity up to 10X the investment amount). Providing this type of flexibility allows us to increase the number and types of successful outcomes in the fund and allows us to return capital back to our LPs sooner.”


Calm Company Fund invests in bootstrapped companies to help them unlock more growth. All Calm investments are made using the Shared Earnings Agreement (SEAL) – a custom salary/profit share structure, aligned with how most bootstrapped founders are compensated. The fund specializes in “micro-SAAS,” often investing to help the founder go from part-time to full-time on their business or make a key hire.

In addition to its unique funding structure, Calm employs a custom tool called “Trailhead” to connect and communicate with companies over time, as opposed to a traditional VC pitch. The fund’s network of mentors are all invested LPs, ensuring they have “skin in the game.” After a small pilot Fund I, Fund II is a rolling fund, allowing Calm to grow LP capital to scale its investment activity over time.


TinySeed. According to co-founder Rob Walling, based in Minneapolis, Minnesota, “TinySeed is the first startup accelerator designed for founders who don’t want to raise traditional venture capital. We are designed for SaaS founders who want to maintain control of their companies and who would traditionally bootstrap since venture is not a path they want to travel. 

“We are a year-long, remote accelerator for early-stage SaaS companies. One of our unique aspects is that we fund LLCs and C-Corps in all 50 states, not solely Delaware C-Corps. And while our terms allow companies to raise future rounds, that is not the goal for many. Our founders can run their companies profitably and pull out dividends, they can raise additional rounds, or they can decide to exit. TinySeed money doesn’t come with the typical ‘strings attached’ you might see with venture capital.

“In addition to a year of remote guidance, mentorship, and community via our batch model, we invest $120k-$240k depending on the number of founders. Our mentor list includes folks like Jason Fried, DHH, Hiten Shah, Laura Roeder, and others. As of late 2020, we’ve deployed approximately $4M across 23 investments.

“We determine a salary cap with the founder based on a software engineer in the closest major city. As the business generates profit, the founder can choose to increase his/her salary up to the cap. Any additional funds they take out of the business are considered dividends. This allows the founder to reinvest profit in the company as long as they like. In this scenario, TinySeed does not take revenue or profit from your company, only dividends that you decide to pull out at timing that works for the business. Dividends are split pro-rata based on percentage ownership.”  Details on Tinyseed’s investment terms here.

Other Flexible VCs

Purpose Ventures. Achim Hensen, co-founder of this $18m investment company based in Bremen, Germany, said, “Purpose Ventures only invests in companies that are committed to the principles of “Steward-ownership”. This is a legal framework designed to harness the entrepreneurial power of for-profit enterprise while preserving a company’s essential purpose. Steward-owned companies do not exit in a conventional way; instead, they are set up to stay independent and mission-driven for the long run.

“Purpose Ventures’ deal structures are bespoke to each company. We have invested using demand dividends (such as here), redeemable shares (such as here / here), revenue-share investing, and conventional debt/mezzanine structures. Investors and founders are fairly compensated with capped returns/ dividends, without investors taking voting power. The terms are designed to fit the individual needs of the company and preserve its mission and independence. Purpose Ventures’s goal is to enable founders to align their values and mission with their ownership and financing structures and be responsive to the specific needs of the start-up.

“In addition, Purpose provides consulting (such as here) and education to help others take advantage of their creative structuring and steward ownership expertise. We are committed to open-sourcing our learnings and materials.

“Our typical terms: Close partnership with non -voting shares/board seats; Capped return multiples (Typical: 2-5X depending on risk profile) with a structured exit for the investors; Long-term investment horizon (10+ years in some cases); typically a couple of years holiday period at the beginning before repayments. By ‘structured exit’ we mean that investors can achieve liquidity without necessitating the sale of a company. Liquidity is achieved through a predefined mechanism (e.g., redemption, revenue share, etc.) and typically at a negotiated multiple.

“To summarize our investment profile:

  • Ticket Sizes:  $50K – 1M 
  • Region: Global with focus on Europe and US 
  • Industries: Sector-agnostic
  • Stage: Stage-agnostic with focus on Early Stage and Series A
  • Prerequisite: Commitment to steward-ownership and clear path or strategy towards profitability”

This essay previously published in Techcrunch.

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