Capital for a changing world.

Jared Ruddy

Head of Marketing

May 16, 2022

In an age when capital is becoming increasingly commoditised, venture needs to work harder for founders.  

The one-size-fits-all approach no longer cuts it. And as the number of founders increases, so too do the circumstances in which they need funding.

Equity-based capital remains our key focus at Forward – but it’s not right for every founder, business and circumstance. As the funding needs of businesses become increasingly varied, more funding options are needed to allow both venture and non-venture backed businesses to flourish.

The startup ecosystem needs to provide founders with novel, flexible capital that fits their unique circumstances – their ambitions, the type of business they run, and where they are on their journey. It’s about providing access to funding for more founders, thus levelling the playing field for those typically underrepresented, and giving those founders their best shot at success. At Forward, we want every founder to realise their potential, and every investor to realise returns.

But it takes more than capital to transform a great idea into a world-changing business. So we focus on giving founders more than money in the early stages of growth. That’s why, alongside our innovative revenue-based financing through Forward Ventures, we provide long-term, hands-on support to our founders through our Studio – our specialist team of startup growth experts.

By identifying founders’ real needs and tailoring our capital and value-added support to meet them, we’re helping them soar.  

Beating a new path

2021 was a record-breaking year for venture funding. Over $675bn was raised globally by startups in last year, doubling 2020ʼs previous all-time high, and the UK’s tech sector experienced its best year ever with some £29.4bn raised by startups and scale-ups and a doubling of the number of tech businesses worth $10bn or more.

But while there’s more capital available than ever before, the eCommerce, software and SaaS businesses that powered the digital transformation face big funding challenges. Venture is progressively skewed towards unicorns, leaving the much greater number of entrepreneurs who are sitting on smaller potential outcomes, or who don't want to run the venture race of fast, loss-making growth, increasingly underserved.

Traditional loans can take weeks to clear, and often require personal warranties and covenants which restrict growth. So start-ups are in a bind: they either have to grow slower than they know they can, or opt for a sub-optimal funding solution.  

In addition, promises of value-add are being made by VCs – and then not met. Our More Than Money report found that 92% of investors said that they provide value-add services, yet 61% of founders said that they got less than they were promised.

To help founders navigate increasingly varied funding journeys – pre-seed rounds, mid-tier rounds, follow-on rounds – and support them effectively, VCs need to make the effort to understand the nuances of each start-up they invest in, to provide the right capital at the right time and advise accordingly. New financing options, and support besides money, for this vast audience of fast-growing digital businesses are vital.

Shaping funding to founders’ needs

This is why we created Forward Advances, our revenue-based financing product.

We saw that revenue-generating SME and eCommerce businesses, which are typically unattractive for equity investment at an early stage, had a need for equity-free growth capital unserved by the incumbent loans and invoice factoring.

Through Forward Advances, we provide equity-free capital to founders in return for a flat fee.  

In short, it provides a cash injection – to, for example, boost their inventory or ramp up their marketing spend – without the founder having to give up equity or commit to a personal warranty.

Serving founder needs is the best way to drive more growth and help founders succeed. It’s a model where venture can work smarter for founders, increasing the odds of transforming great ideas into world-changing businesses, and reaping superior results for investors.

Designed for more established businesses that have stable, growing revenue, understanding the ebb and flow of the business is all the more key to making a timely investment and tailoring our value-add support. And technology now makes this possible, empowering a better understanding of a company’s situation.

Plugging into open banking, payment and eCommerce platforms allows us to build a detailed, verifiable picture of a business – not only the balance sheet, but the unit economics, too. We can reconstruct cash flows, giving a near ‘real- time’ view of a customer’s financial situation and a more granular understanding of the risks and opportunities. Through data from eCommerce integrations like Shopify, for example, we can dig into the key financial characteristics of a business and predict when a company may need additional support. And tapping into media integrations like Google and Facebook ads, we can build an understanding of return on advertising spend.

This data-driven approach allows us to make more informed investment decisions, as well as monitor progress and better support founders in a personalised, hands-on way over time. We can deploy equity-free capital precisely when it’s needed, making the business more likely to succeed.

And this sort of precise tailoring of capital and value-add is important for another reason: it opens new opportunities that the restrictive return windows of traditional venture equity might not allow access to.

Providing funding at start-up speed

Equity-based capital, of course, still plays the key role. Our focus with Forward Ventures remains providing equity funding to ambitious teams with big ideas and the potential for high growth. Those building software, in particular, need the upfront capital to get their product to market.  

But offering innovative, revenue-based financing adds something new to the mix. For one, we can offer it at start-up speed. It’s simpler and faster to implement – ​​the time between initiating the process and receiving funding is days, not the weeks associated with securing an additional round of venture funding – and the founders don’t need to consider giving up ownership or control, allowing them to focus on growing their business.

It also enables us to fund a more diverse range of founders, because it’s not reliant on investor networks or connections. It’s based on the sustainable growth of your business. It opens big opportunities in underserved parts of the market, whether that’s revenue-generating eCommerce businesses or underrepresented founders. By extending our knowledge and support as far as we can, we can support everyone in maximising their own opportunity, levelling the playing field for every founder, no matter their background, gender or ethnicity.

By extending our expertise and support as far as we can, we can help everyone in maximising their own opportunity, levelling the playing field for every founder, no matter their background, gender or ethnicity.

And it goes further than financing.  

We support our portfolio companies through the Studio team, who use their experience building great businesses to accelerate growth for our founding teams. We also share our lessons with the wider ecosystem and run education programmes through an early-stage founders programme.

And the data we can access means we can shape our value-add in a way truly suited to the founder, their business and where they are on the journey. By providing the right funding and the right advice at just the right time, we can help make sure our companies are ready to take on the scale they’re capable of achieving, helping them move faster, build stronger and grow with confidence.

Building together

Serving founder needs is the best way to drive more growth and help founders succeed. It’s a model where venture can work smarter for founders, increasing the odds of transforming great ideas into world-changing businesses, and reaping superior results for investors.

Equity remains the lynchpin, but revenue-based financing – married with permanent capital – is the starting point for a new, more dynamic funding system, empowering digital companies and VCs to be bolder: to build and innovate together over the long term.

With our unique approach to venture capital, we can support a wider set of entrepreneurs with funding and expertise from an early stage of their growth, finding and backing changemakers earlier, and shaping our value-add to serve the diversity of founder needs. And with the data now accessible to us, we can hone our funding and advice not just to the stage of the company, but to specific cost lines and tactical needs. We can nurture those companies to create better outcomes and great returns.

In our mission to help every founder to achieve their potential, the key is the support we offer. Capital for a changing world has to be founder focused. And that's not only how they get the money but what extra value comes with it.

Got big ideas?

If you’re an early-stage founder we’d love to hear from you. You can get in touch via our Offices Hours Programme here.

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Jared Ruddy

Head of Marketing

May 16, 2022

Growth wrangler. Marketer. Customer champion.

Jared has spent his career building great customer experiences. He's started up. Sold. Built new things, including a newspaper. A robot dog. An omni-directional wheelchair. The most visible screen in London. And for a time, the world's biggest picture. Before Forward he led marketing and growth for Marketplace business Plentific, helping them to pivot, scale their business across Europe and raise a $30m round.