Not every startup wants to raise venture capital. And then there are people who want to raise VC money but don’t want to use it for specific things.
In recent years, several firms have emerged to meet the credit needs of such venture-backed and growth startups: i80 group is one of those firms.
Former investment banker at Goldman Sachs Mark Helwani Founded i80 in 2016 after investing in an early-stage New York-based fintech in 2014-2015 through its VC fund, Avenue A Ventures.
“It became very clear to me that fintech was going to explode,” he recalls. “At the time, it was still relatively new. And every time I talked to a company, they would say to me, ‘We know how to raise VCs, but what about credit?’ I just saw this white space.”
For example, proptechs who buy homes on behalf of buyers do not want to use the venture’s money. Fintechs that want to lend to consumers may not want to use equity to do so. Instead, in those cases, credit may be more desirable.
Enter i80. The firm notably offers credit, and has quietly committed more than $1 billion to more than 15 companies over the years — including the real estate marketplace. properlyfinance app MoneyLion and SaaS Financing Company capchase – who have all raised a significant amount of venture capital, but are looking for credit “to help them scale very efficiently and nonchalantly so that they can retain greater ownership of their companies,” says Helwani he said.
Its $1 billion milestone follows fund commitments of close to $500 million from an undisclosed “leading global asset manager” as well as other institutional and retail investors.
I80 – which derives its name from the highway connecting New York and San Francisco – focuses primarily on the fintech and proptech sectors.
“They are the two hubs for the enterprise ecosystem,” Helwani said. “And we’re trying to be a bridge between those two cities.” I80 has offices in both locations and is opening one in Montreal soon.
The firm works closely with VC firms such as a16z (more formally known as Andreessen Horowitz); Affirm and PayPal co-founder Max Levchin’s SciFi; Khosla Ventures; Union Square Ventures; and QED.
“In an ideal world, venture capital would be called venture equity,” Helwani said. “VCs’ capital is important for companies to rent and acquire office space. But when it comes time to do what the real business is about, like providing loans or buying a home, capital like ours is a VC and management business. is very favorable without losing ownership. In these cases, using both credit and equity makes a lot of sense.”
Helwani is reluctant to “loan” the i80 venture. He says it has a very specific meaning and what Silicon Valley Bank and others like it do in providing loans as a percentage of previous equity rounds. Instead, according to Helwani, the i80’s approach is to reduce fees. Most of its deals are “interest-rate related”.
“With mortgages, for example, we never think about the upfront fee, and focus more on the interest rate,” Helwan said. “We believe that the more transparent we are, the more companies will want to work with us.”
The i80 holds quarterly calls with VCs and, for now, it usually sources most of its deal flow. It also gets referrals. Helwani believes that i80 is also different from other firms that offer credit because it is “not trying to be a credit investor in VC clothing.”
He also thinks that the fact that the i80 team is made up of operators as well as investors is a contributing factor.
The firm is set to do half a dozen more deals in the next 60 to 90 days, and then plans to raise more capital.
“We want to fill this gap and help companies raise money at higher valuations in the later stages,” Helwani said.