The Nuances of Funding Beyond Equity

Despite recently securing a $55 million equity fund, Upper90 emphasizes that equity isn't the sole avenue for business funding.

Upper90's Dual Approach

Led by CEO Billy Libby, previously heading quantitative education sales at Goldman Sachs, and Chairman Jason Finger, a co-founder of Seamless, Upper90 was an early investor in both Thrasio and Clearbanc. The firm provides both debt and equity financing options.

While a $195 million fund was closed in December, today’s announcement marks Upper90’s inaugural fund dedicated exclusively to equity investments.

Optimizing Capital Structure

Finger explains that a combined funding strategy is often preferable due to the predictable nature of certain online business components. For instance, a clear return on investment, such as "$1 spent on Facebook generating $8 in revenue," can be reliably projected.

In such scenarios, equity represents the most costly method of financing growth. He expressed concern that founders and initial investors, who bear significant risk and dedicate substantial time to their ventures, frequently end up with a diminished ownership stake.

Debt as an Alternative

While not advocating for debt as the only solution, Finger urges founders to reconsider the perception of large equity rounds as symbols of success. Instead, he proposes collaborating with Upper90 to determine the optimal capital structure, integrating both debt and equity.

He asserts that funding isn’t simply a matter of choosing one option over another. Launching an equity fund within the e-commerce rollup sector is strategic, as it enhances the firm’s ability to secure high-quality lenders who seek equity protection alongside credit facilities.

Long-Term Partnerships

An equity investment fosters a long-term partnership between Upper90 and its portfolio companies. This allows the Upper90 team to move beyond a singular focus on credit-related returns.

E-commerce Aggregation and Beyond

Libby and Finger identify the e-commerce aggregation market as particularly suited to their integrated approach. Companies like Thrasio, known for consolidating Amazon sellers, and Clearbanc, offering revenue-based financing to e-commerce and SaaS businesses, exemplify this trend.

Libby notes a cyclical pattern, stating, “What’s new is old.” He draws parallels to past rollup strategies involving businesses like gyms and dry cleaners.

Amazon’s infrastructure has dramatically lowered the barriers to entrepreneurship, enabling individuals to launch online stores quickly. Therefore, he believes the e-commerce aggregation trend is still in its nascent stages.

Expanding the Model

Upper90 envisions extending this model to other industries. A content creator building a YouTube channel shares similarities with an Amazon store owner.

Looking ahead, Upper90 anticipates evaluating the value of a YouTube subscriber or an influencer’s Instagram following, potentially offering revenue-based financing in these areas as well.