Happy Wednesday, friends! Just back from the Minnesota State Fair (and a deep dive into unconventional funding models) 🎪
First things first: I saw a pumpkin that weighs as much as my Subaru and ate pickles in approximately seventeen different fried forms. The State Fair remains positively epic. ✨
Now for the wonky stuff (you've been warned) 📊
I've been startup-adjacent my entire career—as an employee, consultant, helping clients raise capital—but I've never personally navigated venture capital. So I'm deep-diving into unconventional funding models for semi-conventional businesses.
Let me define that: Semi-conventional = impact businesses that are still for-profit (B-corps, social enterprises, values-first service providers, businesses led by marginalized founders). Their success creates more than just cash—it builds a more just world.
Two models caught my attention:
Model 1: Revenue-Based Financing ('Luni' Libes) Luni runs an accelerator and investment fund focused on education + cash investment. Instead of traditional equity, founders repay 2-8% of top-line revenue for 3-8 years. Once repaid, they negotiate a buyout based on the investor's equity value.
Model 2: Profit-Based Distributions (SparkToro) Rand Fishkin's post-VC approach after his first startup (Moz) didn't go as planned (I highly recommend his book sharing his experience, and am SO grateful for their bold choice to open source their funding docs!). Investors get profit distributions at founder discretion, no board seats, founders control financial strategy entirely.
What they have in common (and why I'm excited):
→ Healthy growth over speed/scale
→ Ongoing cash returns (no forced exits)
→ Investors keep equity upside if there's an exit
→ Abundance mindset: Investors are expected to recover a healthy return on their initial investment, but in the case of exit, they'll get "whichever is greater," of the potential amounts.
The key difference:
- Luni's model is revenue-based = payments come off the top (founders pay investors before themselves)
- SparkToro's model is profit-based = founders get living wage + benefits first, then profit distributions ONLY when investors have been repaid
Here's where it gets interesting: What if we combined the best of both? Investors could have values-based influence (without board seats) by requiring business models that support living wages and full benefits for everyone involved. Founders cap their salaries until investors are repaid, then unlock raises/bonuses.
My ask (as always): What else you got? 🚀
Looking for:
→ More unconventional funding models
→ Values-based investing approaches
→ Models built on trust, regeneration, abundance, respect
→ Anything that feels like investor activism for startups
Your introductions have been incredible—I've connected with genuinely wonderful people who are as excited about these questions as I am.
See you next week!
P.S. If you made it through all this wonkiness, thank you for thinking this stuff matters as much as I do! Your time and attention mean everything.
P.P.S. My favorite of dozens of llama costumes, for your viewing pleasure:
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