Not every startup wants to raise venture capital. And then there are those who want to raise VC money but don’t want to use it for certain things.
In the past few years, a number of companies have emerged trying to meet the loan needs of such venture-backed and growth startups: i80 group is one of those companies.
Former Goldman Sachs investment banker Marc Helwani founded i80 in 2016 after investing in early-stage New York fintechs through his VC fund Avenue A Ventures in 2014-2015.
“I knew that fintech was going to explode,” he recalls. “It was relatively new at the time. And every time I talked to a company, they said to me, ‘We know how to raise VC, but what about the credit?’ I just saw this white room. “
For example, proptechs who buy homes on behalf of buyers don’t want to use venture capital. Fintechs that want to give credit to consumers do not want to use equity for this. Instead, a credit rating might be more desirable in these cases.
Enter i80. The company is a credit-only company and has tacitly tied up more than $ 1 billion with over 15 companies – including the real estate marketplace – over the years Correct, Finance app Money lion and SaaS finance company Capchase – who have all raised a significant amount of venture capital but are looking for loans “to help them scale very efficiently and without dilution so that they can keep more ownership of their businesses,” said Helwani.
The $ 1 billion milestone follows nearly $ 500 million in fund commitments from an unnamed “leading global asset manager” and other institutional and private investors.
I80 – which takes its name from the freeway that connects New York and San Francisco – is primarily focused on the fintech and proptech sectors.
“They are the two centers for the venture ecosystem,” said Helwani. “And we try to be a bridge between these two cities.” I80 has offices in both locations and will soon open one in Montreal.
The company works with VC companies such as a16z (formally known as Andreessen Horowitz); Affirm and PayPal co-founder Max Levchins SciFi; Khosla Ventures; Union Square Ventures; and QED.
“In a perfect world, venture capital would be called venture equity,” said Helwani. “The capital of VCs is critical for companies to rent and get office space. But when it comes to doing the real business, like making loans or buying houses, capital like ours is very profitable without VCs and management losing ownership of the business. In these cases it makes a lot of sense to use both credit and equity. “
Helwani is reluctant to refer to what i80 venture capital offers as “debt”. He says this has a very specific connotation and Silicon Valley Bank and others like them do when they provide leverage as a percentage of a previous equity round. Instead, according to Helwani, i80’s approach is to minimize fees. The vast majority of deals are “interest rate related”.
“With mortgages, for example, we never think about the fees in advance and focus more on the interest rate,” said Helwan. “We believe that the more transparent we are, the more companies will want to work with us.”
I80 makes quarterly calls with VCs and currently typically draws most of its deal flow. It also gets recommendations. Helwani believes that i80 differs from other credit firms in that it “doesn’t try to be credit investors in VC clothes”.
He also believes the fact that the i80 team is made up of operators and investors also helps.
The company will close an additional half a dozen deals in the next 60 to 90 days and then plans to raise more capital.
“We want to fill this void and help companies raise money for higher valuations in their subsequent rounds,” said Helwani.