Picture this: Your company has a proven business model, consistent recurring revenue, and an obvious path to growth. You’re making money, but need a cash infusion to get to the next level. You aren’t poised to grow the 10-30X VC’s or angel investors might be looking for, and while you have money coming in you don’t have the balance sheet for a bank loan. What do you do?
Guppy Tank, coming to Galvanize in Denver on September 12th, might have an answer. Born from the idea of TV’s Shark Tank, Guppy Tank is a 1-day alternative lending/investing event to help companies that have revenue but need cash. I was able to talk with Founder and CEO Darrin Ginsberg on the phone, and then catch up with COO Jon Engleking after he was on the Venture Banking panel hosted by Rockies Venture Club that evening.
Alternative lending has a few advantages over more traditional methods of acquiring funds. While venture capital may be the sexy way to raise money, only around 1% of companies ever do, since most are outside of the growth potential VC’s are looking for. Even for the businesses in their target range, we’ve seen the Series A crunch, which can fall around the time that companies have proven their model but aren’t profitable yet. Angel investors as a group fund a wider range of businesses, but they’re looking for similar things as VCs. Bank loans mean the entrepreneur gets to keep their equity and upside potential, but they typically loan against either hard assets, or profitability with a strong balance sheet – neither of which are common in a startup. While alternative lending may involve higher interest rates than a bank, it can fill a gap in the funding landscape for promising companies that are making money but couldn’t get loans otherwise.
The Guppy Tank team has seen success with this concept before. Their first company in the space, Super G Funding, provides debt financing for credit card processing companies (ISO’s), again lending against residual revenue streams. After getting that up and running, BizCash was next, operating on a similar model of revenue backed installment loans, and serving a wider variety of businesses than Super G Funding.
Guppy Tank is a combination of the ideas from their other companies and the show Shark Tank. Although the events aren’t televised, they are similar in format, hosting 7-10 entrepreneurs to pitch throughout one day. Denver will actually be their first event open for the public to watch. There are a few differences from the show – Guppy Tank will make decisions as a group, so you won’t see them fighting against Mark Cuban for deals. Instead of having a set panel of investors, Guppy Tank invites local angels to participate in events for each city they host events. Although they’re primarily oriented toward lending $25,000-$500,000 per event, The Guppy Tank is also open to making minority equity investments. They’ve hosted events in both Newport Beach and Los Angeles, CA and now have plans to expand to the rest of the country.
“Denver has good vibes,” Jon said at the RVC event. Maybe that’s why they chose Denver as the first event outside of California, ahead of Chicago and New York. They have chosen Denver for investments in the past, as Darrin is an investor in INCOM Direct, SupportLocal, and Zen Planner. Since SupportLocal offices out of Galvanize, they had already had a good experience, and were excited to host the event there.
Applications are due no later than September 8th 2013, but space is limited so make sure to get applications in early. Since the event open to the public, (and just before Denver Startup Week) if you just want to watch, come by Galvanize on September 12th!
Article by Tim Harvey, Regular Contributor to the Rockies Venture Club Blog