But the most personal dollar cost of SEAL capital for the founders is the idea of a “low but fair” salary for the founders. This term allows the SEAL investor to draw a line above which the founders` salary is considered part of the founder`s profits, i.e. added to net Income and therefore subject to a proportional profit percentage for the investor. What are the salaries of the founders? Most entrepreneurs see that income is collected, that other expenses become redundant, and what remains, it is a sum of money that the founders can break down into one of three things: 1) founder (s) salaries 2) dividends3) retained profits (held in the company #2 #1, Liquidity Capital: Ron Daniel, co-founder and CEO: “Liquidity Capital offers the technology company growth with a single, unsecured financing alternative that allows them to double their growth and extend their track without giving up their equity or guarantees. Our model is simple – we buy a portion of the unsecured future turnover of a start-up at a small discount in advance. We can use capital within 14 days of applying for funding, and our agreements are free and have no hidden fees or alliances, with a model favourable to the founders. Well, on the shared Earnings agreement side, these models may have been inspired by revenue-based investments, but they`re starting to look very different. They focus more on start-ups in the earlier phases, which were most likely plagued by steady revenue growth or consistent profitability, but are not profitable enough to offer multiple (or desire). “To better explain the RBF funding process, let`s use an example. Pied Piper Inc. needs financing to accelerate the acquisition of its SaaS solution. GSD Capital awards $250,000 $US to Pied Piper, which does not take control of the company. The financing agreement sets out the terms of repayment of the loan and sets a ceiling or date on which the loan was repaid.
For a three-year term, the ceilings are usually between 0.4 and 0.6 times the amount of the loan. Each month, Pied Piper checks her receipts and sends the agreed percentage to GSD. If the company undergoes a rough patchwork, GSD is down. Monthly payments are discontinued as soon as the limit is reached and the loan is repaid. In a situation where Pied Piper`s revenue growth is higher than expected, advance rebates are integrated into the structure, which reduces the cost of capital. Traditionally, equity investors are only entitled to a percentage of dividends. But the founders, who all own most of their business, have the right to draw arbitrary lines between wages, deductions and dividends. This does not make much sense and can turn into proxy fights for a “fair” wage if investors get a seat on the board that authorizes salaries, etc. Instead, we decide to incorporate everything that represents the economic value of the founders. SEAL investors receive an agreed percentage, called shared earnings, which provides greater clarity and direction.
Meanwhile, investors collect rents and a lot of things. I say rent, not dividends, because their application is based on a legal agreement and not on equity. With 30% of the profit until the return is reached, it is the equivalent of a complete partner or more. Studios are your space to meet you, schematically, get advice, work together, work a little, participate in events and organize events. For the past 10 years, betaworks has been working and networking — starting businesses, making accelerators, investing in talent — and now we`ve opened our doors.