BY ENTREPRENEURS FOR ENTREPRENEURS
We have chosen an investment instrument that solves four major challenges faced in the typical fundraising process.
No Personal Guarantee
No exposure to entrepreneur's personal assets. Suitable for asset-light companies.
Raise Capital in Weeks
Tech-driven Risk Scoring Model. Faster capital allows faster time to market & scale.
Have Greater Flexibility
Monthly commitment based on revenue with payback tenors ranging from 1-3 years.
Constant Capital Infusion
Complements other forms of capital, provides extended runway and a continuous flexible line of credit.
HOW N+1 CAPITAL WORKS?
N+1 Capital is pioneering Revenue Based Growth Capital (RBGC) in India.
Investment Amount upto 4x of Monthly Revenue.
Repayment Mechanism: Monthly Revenue Share, typically between 2% to 9%.
Top-up Capital can be provided continuously for growth
The example below depicts 2 scenarios in which an entrepreneur raises Venture Capital With and Without Revenue Based Growth Capital.
|Company data at time of next funding round||Without N+1 Capital||With N+1 Capital|
|Existing ARR||10 Cr||10 Cr|
|Current Monthly Growth Rate||3%||3%|
|N+1 Capital Infusion||NA||2 Cr|
|Revised Monthly Growth Rate||3%||5%|
|Revised ARR (After 1 Year)||14.25 Cr||17.95 Cr|
|Valuation (Pre Money)||142.5 Cr||179.5 Cr|
|Funding amount||20 Cr||20 Cr|
|Valuation (Post Money)||162.5 Cr||199.5 Cr|
|Founder’s Stake (Pre Investment)||80%||80%|
|Founder’s Stake (Post Investment)||70.15%||71.98%|
|Founder’s Net Worth (Post Investment)||114 Cr||143.6 Cr|
Cost Benefit Analysis for the Company
|Debt Amount||2 Cr|
|Repayment Cap||1.25x of Debt Amount|
|Price Paid (A)||50 Lakhs|
|Valuation Increase (B)||37 Cr|
|Net Benefit (B-A)||36.5 Cr|
TARGET COMPANIES FOR N+1 CAPITAL
N+1 Capital is a Sector Agnostic Fund which would invest in companies that have:
Monthly Revenue of 50+ Lakhs for last three months
Low, Moderate or High Growth
25% or more Gross Margin
Low or Negligible Existing Debt
- 1 Innovation We observed a need in the market for capital for stable growth companies. We started India’s first Revenue Based Growth Capital Fund to help companies grow by fulfilling that need.
- 2 Data-Driven We believe numbers speak louder than words. We use tech-backed data-driven algorithms to supplement our investment decision-making and make better decisions.
- 3 Agility We want entrepreneurs to spend time growing their business and not raising funds. We act fast and complete the end-to-end investment process within 6 weeks.
- 4 Empathy We believe entrepreneurs deserve a solid chance to build the business of their dreams, sustainably and profitably and that too at their own pace.
- 5 Persistence We know companies end up seeing many short-term failures on their way to long term success. That’s why we chose an investment instrument that allows us to accommodate short-term failures.
FREQUENTLY ASKED QUESTIONS
How do you differ from a typical Venture Capital or Private Equity Investors?
We are an investment firm that provides funding on a share of revenue basis. Investments are not collateralized; there are no equity sale requirements. Investment contracts are structured so that repayment is sourced solely from an agreed-to percentage of revenue and capped per mutual agreement. Given a shared objective of revenue growth – as opposed to positioning for IPO or strategic acquisition – there is no need for difficult front-end valuation processes.
How is it different from debt financing?
Banks and other lenders require a set payment schedule irrespective of company performance. Our investments are repaid solely on the basis of revenue. If sales trend lower than expected, payments decrease proportionately. If sales are higher than anticipated, the investment is repaid early. Lenders also require hard assets or other personal guarantee to collateralize a loan. Our revenue-sharing investment structure eliminates these requirements.
Are there any restrictions around the use of capital?
We will only finance revenue generating activities. We're looking for repeatable and scalable processes that have a history of yielding a growth in revenue. These activities can range from hiring employees, marketing or advertising spend, inventory purchases, or any use of capital that will lead to higher revenue. We will not finance the consolidation of debt, payoff existing debts, R&D capex etc. Investments are typically utilized for operational objectives including but not exclusive to new product launches, sales expansion, and working capital for inventory and/or receivables.
How is a typical investment structured?
In return for an investment, an agreed-to percentage of future revenue is paid to us until the pre agreed total payout is repaid (typically over a 36 month period). Determination of the total amount to be paid is based on the timing and certainty of payment amounts and other risk factors run through our risk algorithm and investment committee decision.
How is it different from venture debt?
Just like bank financing, venture debt requires fixed payments, collateralization of hard assets, and other personal guarantee. Also, venture debt typically requires an ownership stake in the form of warrants. We don’t have any of these requirements. Most importantly Venture Debt requires the presence of a VC investor on your cap table which we do not.
How does your due-diligence process differ from that of Venture Capital or Private Equity Investor?
Our due-diligence process is thorough yet more focused than other sources of investment capital. Analysis is focused solely on the company’s ability to generate sustainable revenue and gross margin to cover the investment while allowing the company to thrive. Since positioning for IPO or strategic acquisition is not the objective of investment – and therefore no need to evaluate the potential for this type of outcome – analysis is dramatically simplified.
What size of investments do you offer?
The size of the investment is typically up to 4x of monthly revenue with a minimum of INR 1 Cr and a maximum of INR 15 Cr.
Will you invest in companies that are not profitable?
We invest based on recurring revenue, not profit. Burning cash to grow is part of high growth strategies; we like to see this done in a managed way which fits into the objectives and growth plan of the business. If a company has low debt, a plan, low churn, and enough revenue, we are fine with pre-profitability.
Can I prepay the total payout amount?
Prepayment is allowed under certain situations on a cases to case basis.
N+1 Capital in the Media.
#AwaazEntrepreneur। भारत का पहला रेवेन्यू आधारित फंड। क्या है रेवेन्यू आधारित फाइनेंस? रेवेन्यू आधारित फंड से आएगा कितना बदलाव? जानने की कोशिश की @AEHarshada ने N+1 capital के @ashishrsingla और @letsventurein के @nimeshkampani से। pic.twitter.com/ljLkMOI9qW— CNBC-AWAAZ (@CNBC_Awaaz) January 23, 2021
#AwaazEntrepreneur। रेवेन्यू आधारित फाइनेंस की बारीकियां। स्टार्टअप और निवेशकों के लिए रेवेन्यू आधारित फंड के फायदे। देखिए @AEHarshada के N+1 capital के @ashishrsingla और @letsventurein के @nimeshkampani से खास बातचीत। pic.twitter.com/hYZxUMSoG2— CNBC-AWAAZ (@CNBC_Awaaz) January 23, 2021