Angel Insights Blog

By: Kevin Learned and Denise Dunlap, Sage Growth Capital

“My investors want to renegotiate terms” or “I thought my round was committed but now my investors are backing out”. If this sounds like you, you’re not alone – we have been hearing similar stories from several entrepreneurs over the past two months. 

Thanks to COVID-19, we are all in a time of great uncertainty and it’s natural for investors to adopt a “wait and see” approach. No one knows what the long term effects will be on the economy and everyone’s portfolio has taken a hit thanks to stock markets crashing all over the world. Small companies and large companies are all facing the same level of uncertainty which is what makes this such a remarkable event across the financial spectrum. Generally, it would be one industry or one type of size company who experience limited access to capital because of an exogenous event.

The team at Sage Growth Capital believes in the resilience and creativity of entrepreneurs and in the ability of the US economy to rebound. Therefore, we are continuing to invest – in all industries and types of companies, with a focus on smaller entrepreneurs.

Over the past few weeks we have received numerous applications for funding. All of the companies are scrambling to adapt to new ways of keeping their business going amid work-from-home mandates and suddenly wary customers. Many of the entrepreneurs are also having to renew their fundraising efforts because progress on rounds they thought were committed has suddenly stopped or reversed. We even had companies that have the opposite problem – stay-at-home is driving more people to use their product and overwhelming their supply chain.

If one of these things is happening to you, or to your portfolio companies, now might be the time to consider revenue-based funding. Revenue-based funding means we invest in your company in exchange for a share of top-line revenue until we have received a multiple of our investment. For example, we might invest $100,000 in exchange for the right to receive 5.5% of monthly cash receipts from sales until we have been paid back $250,000.

Our model of financing is non-dilutive. That is, we don’t take an ownership percentage of your company. Happily, for you and for us, your pre-money valuation is irrelevant. So is your exit strategy.

We also don’t care if you have received or intend to pursue government-sponsored loans or grants. We don’t take collateral or require personal guarantees, so you preserve your access to the credit markets.

What we do care about is your revenue stream. If you have recurring and growing or steady revenue, and good, consistent margins, we will consider investing in your business. Our requirements are the following:

• minimum of $300,000 in revenue over the past twelve months
• consistent margins of 40% or greater
• use of capital that will grow your sales

And, if you can grow your sales with our capital, then you just may be able to raise equity capital when the markets unfreeze at a higher valuation than you could before the crisis.

We have a very simple preliminary application on our web site: www.sagegrowthcapital.com/apply-now . Fill it out and we will let you know in a day or two if we will consider investing in your business. We will consider applications for $100,000 to $400,000. If you need more than $400,000 we may be able to syndicate the deal to raise more than our fund’s limits.

You have enough to worry about keeping your business afloat and your family safe. Let us help you with your growth capital needs!

Sage Growth Capital makes revenue-based investments in regional companies who need growth capital. It is our mission to provide a more flexible funding option to growing companies who do not fit traditional equity or lending models. To learn more about Sage Growth Capital or to apply for funding visit: www.sagegrowthcapital.com.