Re: How can we create a funding model for lifestyle businesses?

Kyle Redinger — Sat, 14 Jun 2008 13:51:20 -0000

Taylor, I think the incubator model works very well to solve this problem. If you can take away overhead costs (legal, AP, AR, assistants, office, etc expenses) then you can enable entrepreneurs to focus on product/sales instead of all these other limiting factors.

If you are focused on managing a fund which invests small amounts into companies and a significant chunk of your investment is going into paying service provider fees, why don't you subsidize those costs with in house accountants, assistants and other related services?

So, the model is pretty straightforward to me, you exchange a smaller amount of cash (maybe just to fund living expense), but provide the needed infrastructure and advice to start the business and focus on generating dividends for the investors and founders as quickly as possible. That can be organized pretty much anyway you want, via standard/convertible debt, and/or preferred/standard equity.

The bigger problem is efficiency. Why, as a manager of this type of fund, want to deal with 20 small companies when you could deal with 4 large ones? That's a major limiting factor and not an easy problem to get around.

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Re: How can we create a funding model for lifestyle businesses?