Seth Godin on Royalty Based Finance

As regular readers know, Andy and I have been messing around with a new approach to early-stage tech investing called royalty based finance. It’s still early days, but we’re very excited about the idea because it represents an entirely new “third way” of supporting the growth of young companies vs. the traditional equity-centric angel or VC path.

As we circulate the idea with both investors and entrepreneurs we’ve been hearing significant excitement about the approach on both sides of the table. So I was surprised and pleased this morning to find Seth Godin – a thinker and blogger I respect a lot – promoting a similar idea. His blog post is titled ‘Debt, equity and a third thing that might work better’ and his conclusion gets it just right:

“My general bias for entrepreneurs starting out is to bootstrap their business, because raising money is so hard and so distracting. But if you’ve set out to do something that needs cash you can’t raise any other way, this is worth exploring. Tell a story to an investor that wants to hear it, and create a cash-flow scenario that makes the investment worth it for both of you.”

We have some good stuff in the works on this topic – stay tuned.