At Malpani Ventures, we believe that our success lies in the success of the founders whose startups we invest in. In today’s growth at any cost investment ecosystem, where companies are encouraged to focus only on revenues, we want to explore the road less traveled by supporting founders that want to create profitable, sustainable businesses at scale.
We are looking for gazelles, not unicorns!
Startups need capital to grow, and while larger organizations have the liberty of using internal accruals, debt, or equity to fund their growth, startups do not. Even if they are profitable. Their P&L is not strong enough to support growth. Banks are not willing to lend to smaller companies as they are deemed risky. Venture debt is almost negligible, and whatever exists is predatory. And VCs are not interested in businesses that are not in hyper-growth domains.
So where will the founder go?
For startups that are willing to grow organically, but have limited resources at their disposal, we are willing to extend the option of Revenue Based Financing or RBF. We want to offer growth capital to startups that can be in the form of revenue or income share agreements. The founder decides how to structure the RBF. All we are looking for is a 35% IRR that makes it worth our while.
Timely infusion of funds can help founders grow their businesses faster, and everyone in the ecosystem benefits. We focus on unit economics and helping the founder grow their business frugally.
What are we looking for?
We are actively looking to fund companies in SAAS or eCommerce domain
We want to fund companies with gross margins of more than 50%
We will prefer founders utilize RBF funds in sales & marketing, geographic expansion, or working capital financing
We will partner with founders who want to grow frugal businesses
We have a soft corner for founders from Tier 2 & Tier 3 towns in India
We will prefer mature founders who have a domain experience
What are our general terms for an RBF
Our financial goal is to make a 35% IRR from this instrument
We plan to provide 6-9x of Monthly Revenue Runrate as RBF funds
The variable revenue share can be between 5-10% of monthly revenues
The fixed coupon of the instrument can be as low as 0.01%
We welcome prepayments at any point in time
We will extend a moratorium of up to 6 months after disbursal
We will close the instrument once we receive our expected IRR
In companies where we are not existing equity investors, there will be equity of up to 1% which will be transferred to face value to us at the beginning of the RBF. This will be returned back to founders at face value itself when the instrument closes. This is because Section 73 of The Companies Act does not permit anyone except Shareholders, Directors & Relatives of Directors to extend a loan to a private limited company. Once equity is transferred to us, we can extend the loan as a Shareholder.
If you are a founder whose startup fits our thesis, please reach out to Siddharth at ss@malpaniventures.com with the subject line ‘RBF: [Your Startup Name]‘