It might be strange to hear this from a firm that just raised a $55 million equity fund, but the team at Upper90 would like to remind you that equity isn't the only funding that's available.
Upper90 is led by CEO Billy Libby (former head of quantitative education sales at Goldman Sachs) and Chairman Jason Finger (co-founder of Seamless), and it was the first investor in both Thrasio and Clearbanc. The firm offers debt and equity funding, and it just closed a $195 million fund in December — but the fund announced today is Upper90's first to be devoted purely to equity financing.
Finger said he and Libby have taken this combined approach because there are often predictable parts of an online business, where (for example) "if I'm doing some marketing, I know that $1 on Facebook will generate $8 of revenue." In those cases, "equity is the most expensive way you can finance growth," and he said it "really fundamentally bothered me that the founders and early investors who took a lot of the risks, dedicating their life on a 24/7 basis" would often end up owning a small percentage of the company.
That doesn't mean debt is the only solution, but in Finger's words, founders should stop seeing big equity rounds as "a badge of honor." Instead, they can work with Upper90 to find the "optimal capital structure" combining both elements.
"Life isn't binary," he added. "Part of the reason we launched an equity fund in the [e-commerce] rollup sector is that equity is an important piece for you to get the highest quality lender — they’re going to want to know that there’s equity protection underneath their credit facility."
He also suggested that making an equity investment turns Upper90 into a "long-term partner" for the companies it backs, freeing the team from being "purely focused on the returns related to our credit."
As alluded to earlier, Libby and Finger see the e-commerce aggregation market as one that's particularly well suited to their approach. (Thrasio is perhaps the best-known startup rolling up Amazon sellers, while Clearbanc offers its own revenue-based financing to e-commerce and SaaS companies.)
"I always say: What’s new is old," Libby told me. "If we had this conversation 15 years ago, we'd be talking about rolling up gyms and dry cleaners and smoothie shops [ … ] The infrastructure that Amazon has developed allows people to be entrepreneurs in a week, so I think that we’re still extremely early in this trend. There are going to be so many more people starting their own store on Amazon."
And eventually, he suggested Upper90 could take a similar approach in other industries: "A content creator who starts a YouTube channel is not that different than the Amazon store owner. Five years from now, we could be talking about: What's the value of a subscriber on YouTube, what's the value of an influencer's following on Instagram, how can we bring some of that revenue forward?"