It’s a grim thing to witness when a tech company founder fails to find the money they need to scale–unless they sacrifice meaningful ownership of their own beloved “baby.”
This has long stuck in the craws of Jason Finger and Billy Libby, two tech company founders themselves, who in response put together Upper90. This fund, opened in 2018, provides financing to businesses using a model that helps founders and early investors to keep more ownership of their companies. “We were tired of what we saw happening all around us,” says Finger. “Founders were exiting their companies with heartbreakingly little ownership to show for their efforts, due to the terms of the investments they took in.”
Upper 90 recently raised a second fund of $195.5 million. following an initial $75 million. I spoke with co-founder Finger, whose prior career includes founding Seamless, which, after its merger with GrubHub, was acquired earlier this year for $7.3 billion.
Micah Solomon, customer experience expert and senior contributor, Forbes: Tell me about Upper90: What does it have to offer to startups that has been lacking to date?
Jason Finger, co-founder and chairman, Upper90: It’s a fund created for founders, by founders and business leaders. The problem it addresses is this: Venture funds want to take large equity stakes and banks are looking for established businesses with meaningful track records. That leaves most entrepreneurs choosing between two extreme options: substantially dilute their equity or suffer slow growth. We allow them to avoid having to pick either of these scenarios in a binary way by using data to do predictive modeling in a manner that gets us comfortable extending credit to emerging businesses.
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Solomon: Is this approach inspired by your own career as an entrepreneur?
Finger: As an entrepreneur, I’ve always found myself attracted to creative ways of funding expansion and growth. Partly this can be traced to me launching my first real business during the implosion of the dot-com bubble, which required us to think about how to optimize our business model for capital efficiency. I think an even earlier backdrop is a factor here as well: I grew up in a household affected by bankruptcy, so I have first-hand experience with how hard it is to build a business and how important it is to maximize the gains when they occur.
Solomon: What do you look for when you’re choosing to invest?
Finger: We often find that the best founders (and loudest cheerleaders) in our portfolio are second or third-time founders. They are willing to go against the grain and understand what is most important and realistic from a capital partner. In terms of what we seek specifically, it is an intangible quality that is hard to define, but we feel that “you know it when you see it.” In that I believe that investing is really no different than hiring: identify strategically thoughtful people with a growth mindset, who want to work on interesting and significant challenges that can have broad impact, and who possess relentless grit. Once we find this combination, we’re excited to make the investment and to have the opportunity to be a part of their story.
Solomon: What’s your advice to a first-time founder looking to raise money?
Finger: Two things: Find someone with experience to align with who has a deep passion for your business idea and seeing you become successful. And, think about how best to finance your business, at that moment in time. If you are building an enterprise business, is there a way for your customers to finance your business to get started (maybe by pre-paying you)? If you are building a consumer business, is there a way to test your concept very cost-effectively? Keep in mind that while there is a concept of divorce in a marriage, there is no parallel concept of divorce in a company context, so choose your co-founders and your earliest investors very, very carefully. Then, once you have created an initial product that is getting traction in the market, find a financial partner who can truly add value; this can be strategic value, an ability to provide scale capital, an ability to support you financially in a non-dilutive way, or all of the above. And that, by the way, is the premise of Upper90.