Cash Flow vs Equity


Taking equity in death valley stage startups:
*Limits future funding from VCs,
who want less investors when considering a deal
*Increases overhead costs in accounting and legal, costs which could be saved and put toward funding more startups
*Increases the number of voices in the conversation, which takes more attention away from the operations and go-to-market implementation
*Will likely be diluted in later funding rounds
*Provides less incentive for the startup to perform

Cash flow deals with startups:
*Keeps doors open for future funding and investments from VCs, acquisitions, etc.
*Creates a more efficient funding model with lower expenses and overhead
*Allows for a fluent communication structure from fund to startup and from fund to exit partners
*Provides a more liquid option for funders and a more flexible solution for startups
*Ensures a shared risk, incentivized system for funders and startups

In order to work, a cash flow model needs incentive clauses for all stakeholders, exit protection, as well as audit points  and metric tracking by a 3rd party,



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