Indie.vc: Unicorns Are Out, Profits Are In
Why a new approach to venture capital is powering more sustainable startups — and funding more diverse founders
Thompson Aderinkomi was understandably wary about raising venture capital again. Just four months after closing a $7 million funding round for his first startup RetraceHealth in 2016, Aderinkomi was pushed out of the startup by the new board. This was after he had spent three years and taken on $1 million of his own personal debt to build the company. “It was the worst time in my life,” he recalls. “I felt like I had failed my employees, my family, and my early investors.”
When Aderinkomi started another company in 2017, he took an entirely different approach to venture capital, with something called Indie.vc. Unlike traditional VC models, founders who take funding from O’Reilly AlphaTech Ventures’ Indie.vc aren’t pressured to make a land grab for market share or grow at all costs. Instead, Indie.vc startups receive a modest funding amount — ranging from about $100,000 to $1 million — along with a simple term sheet, and the expectations they’ll grow responsibly and turn a profit. There are no VCs added to the boards and no controlling stakes given away. And founders can even buy back the stakes (ranging between 10% and 15%) by hitting certain revenue targets. “It’s like a magical term sheet,” says Aderinkomi.
Of the 10,000 companies that receive VC funding every year, only .06% ever become billion-dollar companies.
And it’s a model that suddenly seems ideally suited for the current economic environment. Last year capped off a record decade for venture investments: The number of VC deals more than doubled during that time, and the value of those deals grew to $140 billion, five times the value of 2009. Billion-dollar-valued unicorns became the norm, with around 500 companies attaining that status since 2014.
Then came the pandemic that brought the economy to its knees — and many unicorns with them. Following the longest span of economic growth in history and one of the steepest collapses since the Great Depression, VCs are now telling their portfolio companies the same thing: just survive…