The traditional venture capital model has been around for years. Unproven startups raise rounds of financing in exchange for equity in their company. Eventually, they grow to a size and stability that allows them to access debt from lenders, but in the meantime, if they want growth capital, they have to give away a stake in the company.
This model means that many founders retain only a sliver of equity in the company they started. Billy Libby, CEO of Upper90, wants to change that.
Billy worked for years at Goldman Sachs, eventually becoming head of quantitative execution and market making sales. In his time there, he came to appreciate the value of data.
Data doesn’t just help business owners make decisions, it can inform investors, too. As an investor, you can look at a company’s earnings, pipeline, inventory and more to make fairly solid inferences about the future health of the organization.
So Billy thought, why not use the information in a company’s data as collateral? If you can predict that a company will be successful in the future, you can extend debt capital earlier in the company’s life.
That’s what Upper90 seeks to do. They offer non-dilutive growth capital to companies that can prove reliable growth. Their unofficial motto is encouraging startups to “delay the A.”
Rather than rushing to raise another round, and give away equity in the process, why not rely on debt instead? Many traditional lenders are unwilling to take a risk on a company that appears untested on paper. But Billy and his team have found that data allows them to invest confidently in earlier-stage companies.
Their track record speaks for itself. Of the first 12 companies they’ve invested in, four are already unicorns.
Throughout the episode, Billy offers several stories of the types of business growth Upper90 helps to fuel. Take, for example, the tech-enabled driver’s ed startup in their portfolio. The traditional driver’s ed model hasn’t changed since we first got behind the wheel. It’s all independent schools in towns across the country, relying on a fleet of rickety old vehicles.
This startup is an app that connects driving students and teachers, and the company provides a Prius for each teacher. The company’s biggest expense, unsurprisingly, was the Prius. And by working with Upper90, they were able to secure a credit facility to buy the cars, rather than relying on equity to do so.
Now after early success, the startup is expanding by purchasing legacy driver’s ed schools. The founders returned to Upper90, who crunched the numbers behind their early growth and decided it was wise to establish a second credit facility to fuel this expansion into new markets.
Billy sees what the team at Upper90 is doing as an opportunity to offer a hyper-personalized experience in the world of finance. Personalization has become de rigueur in many other areas of business, but financial services has lagged behind.
Funding is a more crucial piece of the startup equation than many founders initially realize. It can be difficult to sort out working capital. Investors and lenders are running a business, too, and they can’t afford to take a risk on something that won’t work out. Often, the needs of the founder and lender appear to be at odds.
Fortunately, Upper90 has proven that data can go a long way to reducing guesswork or reliance on gut feelings. By using technology to make investing less risky, all the parties involved come out winners.
Episode Transcript
Rob Ristagno: Accessing growth capital is one of the most critical tasks facing a founder. Many entrepreneurs raise equity because they’re just not big enough yet to get debt. What if there were another way? Today’s guest is disrupting the traditional VC model and helping founders delay their A.
Announcer: This is the CEO Campfire Chat with your host, Rob Ristagno. Taped in front of a live studio audience, join us to hear successful growth stories from middle-market companies just like yours. Sponsored by the Sterling Woods Group.
Rob Ristagno: Welcome to the CEO Campfire Chat, recorded live in front of a studio audience of leading executives. I’m your host Rob Ristagno, and I have the privilege of introducing you to Billy Libby, the CEO of Upper90, which is a leading provider of non-dilutive growth capital. And they provide an alternative to raising more equity to companies that can demonstrate predictable revenues. Billy comes from Goldman Sachs and Barclay’s Capital. Welcome Billy, it’s great to have you on the show.
Billy Libby: Thanks so much for having me.
Rob Ristagno: Now, could you give us an elevator pitch? Exactly what problem is Upper90 solving?
Billy Libby: I think startups have been accustomed to raising equity for every part of their growth cycle, and once you get to a certain stage then banks will consider giving you debt. And so there’s been this narrative of raise equity, get debt, raise equity, get debt. And what’s happened is, as more and more AUM has come into private equity and venture, the investors are now making more than the founders, and I feel like that’s going to change and so that’s one issue. So my partner Jason Finger started Seamless/GrubHub, and I think when he merged with GrubHub the Seamless management team owned the majority of their company. Because they were very efficient about how they used dollars to reinvest and how they got money for marketing and et cetera, and the GrubHub team I believe owned less than 10%.
Rob Ristagno: A big difference.
Billy Libby: So that’s one area that we’re trying to address, the second unifier is data. So everything we do in life is captured in data now. If you’re a startup and you’re spending a dollar on marketing and you’re making $5, that’s a measurable growth activity that is captured canonically. You can look at Amazon, PayPal, Stripe, Shopify, you can see every dollar I’m making then you can look at Snap, Pinterest, Instagram, and you can see my marketing ROI. So if somebody has positive marketing metrics and has very sustainable revenue for the last year, they should be able to get a loan against expected future revenue.
Billy Libby: So if you’re a startup, I mean, we’re not splitting the atom here, if you’re a company why would you be using the same equity dollar on something that’s measurable and predictable versus something that’s binary, like building technology? So everything is a nail right now and so I think we’re going to see, like in every other part of our life all of us on this call look at Netflix, we all see a different home screen. When you’re a startup you’re raised with the exact same equity dollar. So I feel like data and companies like Upper90 will help founders have more options earlier to grow their business in a more tailored way. And ultimately that means they can grow just as fast but reduce dilution.
Rob Ristagno: I see. Makes sense. And one thing you’ve mentioned in the past is that founders are pretty excited about how much money they can tell their friends that they’ve raised from an equity standpoint, but then I guess they’re feeling pretty disappointed if they’re left with just 10% ownership after doing all that hard work.
Billy Libby: Yeah. I mean, who’s smarter? Who’s more successful? The owner of Vox that went public, and own 2% of the company? Or the person that has a $100 million business and owns 90% of it? I mean, so I almost can guarantee–I started in quant trading at Goldman and technology and data decimated long short. No one is really a stock picker anymore unless you’re an exceptional person, an all-star, right? Now it’s like, I see the same thing generally in venture capital, it’s like, oh, look at the team and look how great the TAM of the industry is and you’re just going to see a lot more quantitative principles brought to it.
Billy Libby: But it’s a personal decision, right? You’re a startup and you’re picking a partner. So when we started Upper90 all of our LPs are interesting founders, we didn’t go after institutions. We have 500 LPs and it’s the most interesting tech and financial founders in the US, in the world. And so we built our business around helping founders have more efficient capital to grow but also all the things you like about VC, like being able to open doors for clients and being able to see these companies early. So our LPs, and a lot of it comes from Jason’s background being a founder himself, creates a flywheel that we can really add, you’re not giving up anything that you would to get from a partner.
Rob Ristagno: One thing I want to pull the string on here is this concept of quant principles and you mentioned earlier that you can look at someone’s marketing ROI, but what are some of the metrics you’re looking at? So you’re seeking companies that have predictable revenues against which you can loan them money. Tell us a little bit, what are the metrics you’re looking at?
Billy Libby: So there’s platforms that have solved a specific problem, like ClearBank, which we were the first capital partner to, helps companies factor their marketings, so that’s kind of the example I just gave. If Allbirds is spending a dollar and making five and wants to accelerate that flywheel, ClearBank gives you capital against future revenue. There’s another company called Braavo Capital which is a portfolio company of ours, where if you’re an app developer selling a product on Apple and Google, which, I’m sure many of us have downloaded a meditation app or a calendar app or a productivity app, these are just small businesses that are now selling online.
Billy Libby: I mean, 20 years ago they’d be a kiosk at a mall or in the back of Popular Mechanics or you name it, right? And when you download an app, these small business owners need capital for marketing, for payroll, for development. Apple and Google pay those developers 60 days later. So Braavo has built a supply chain to validate when an app has been downloaded, to validate usage and to validate when there’s a purchase order from Apple, so they’re factoring something that’s just a new application. And the reason with Upper90, the name of it is a top corner of a soccer goal, I played soccer in college, it’s like these really nichey hard to find skill-based. But if you just take a step back it’s a golden age to be an entrepreneur, we could start a business on Amazon tomorrow selling a product.
Billy Libby: What Amazon has developed I think it’s unbelievable, we want to sell hiking poles, we can design it, we can manufacture it, we can sell it on Amazon within a week, I mean, how amazing is that? But I think all of these small businesses still have these kind of growth capital challenges, the financial system has not really kept up with the technology innovation. So like, if you have a coffee shop on Main Street, you can go to a bank and get a loan. If you have a store on Amazon, it’s just, you can’t feel it, you can’t touch it but there’s inventory, there’s reviews, there’s all of these metrics that you can say, this is a real business that has defensibility but the traditional ways of underwriting a business don’t necessarily apply, so we kind of fill that white space.
Rob Ristagno: Excellent. And tell me a little bit, one thing that’s important is, as you said, the barriers to entry are pretty low which is exciting but on the other hand it might lead to some pretty poor ideas, I guess, that don’t work out. One thing you’re looking for is product-market fit and making sure that companies have not just created these hiking poles out of thin air but they’ve done their homework and found that there’s a need and a marketing play. Tell me a little bit about what you’re doing to assess product-market fit.
Billy Libby: So I want to be clear, there’s a role for equity, when you’re starting a business you have to prove the idea, you have to hire the people, you have to get your first clients, that’s a very binary risky stage. And so often once people raise that seed round and prove the business model, the next Silicon Valley step is to raise a big series A. And so if you’re an Airbnb host and you have 10 properties and you have a really robust rent roll and now that you want to say, look, I have 20 homes in The Hamptons and I have all this revenue that I’m expecting to get this summer, I should be able to get a loan against that revenue, right? So I don’t want to lend it to the first one or two or three but once they’ve shown that they can do it, instead of going and raising as much equity as you can, I think we can kind of extend that initial part of their business which is really the most diluted phase.
Billy Libby: So our slogan is almost like, “delay your A.” But as we talk to your audience, every business has some part that can be financed with Upper90. If you’re an insurance tech business that needs to go and have a down payment for regulation in each new state, not a good use for equity. Every business has some part that is more collateralized and more predictable. One business that we funded, all of our founders become our LPs too. It’s all about finding these interesting deals and solving problems so we sit down with founders that are growing and just understand, what are your challenges? What are your needs?
Billy Libby: And so one of the companies, it’s called Crusoe Energy, they are building data centers that are being brought to Montana, North Dakota, Wyoming and Colorado, where there are oil fields with no pipeline. So when you drill for oil, natural gas gets lost and so this oil field is burning, it’s called flare, looks like a war field if you ever want to look online. There’s more natural gas that’s getting burned every year in the US than the amount of energy consumed in Japan, it has the biggest supplier of oil. So Chase [the CEO and founder of Crusoe] said, I’m going to build these portable data centers that are moved to the energy source and he’s getting paid to take the natural gas and using that to mine Bitcoin at a negative positive energy. So if I told everyone on this call that you’re going to invest in Upper90, have principal protection and get a really healthy yield, you be like, this is a crypto startup, what seems more binary than that? Right?
Rob Ristagno: Right.
Billy Libby: Well, when you sit with the founder, his biggest expense for the data centers is a Caterpillar generator that has nothing to do with being a startup and has nothing to do with being crypto, it can be completely repurposed, but because he was both, the lenders in the equipment world and the bank world are like, no, and so his options are raise a lot of equity. So we said, raise less equity, which we always put equity in the businesses we want to invest in and then we isolated the generator financing and we did a $40 million project to finance this facility. So just every company if that extreme exists, just think of every way to kind of unpack a business and finding what is kind of a healthier part of your business like insurance, it’s not novel concepts but as I talk about it with you as a group it just kind of makes sense, it’s a white space between venture capital and the bank world.
Rob Ristagno: So, yeah. So it sounds like there’s lots of different ways you can collateralize things like generators, you can finance this flywheel, that’s where you have data and there’s some predictable growth. Ever come across a company that seemed like there was some predictability or there seemed like there was some collateral but something changed or went wrong and there wasn’t the product-market fit or there wasn’t this steadiness in the revenue as everyone initially thought and hoped?
Billy Libby: It’s a really good question. So there are certain businesses where there’s some binary or element you can’t control. So scooters, I don’t know how many people in their towns see all the Bird scooters and people zipping around in them. So one of our LPs started one of the scooter companies and a scooter costs, I don’t know, three or 400 bucks and based on a number of rides on a scooter you can get paid back in several months. And so if you have a scooter in Boston you can kind of predict based on all of the ride data what’s the expected payback period on the scooter, so that seems something that should be financed creatively, versus with equity. We passed on that as Upper90 because the City of Boston could decide to take away the license. There’s a binary regulatory component that you can’t underwrite that we would not then invest in versus some of the other stuff I described.
Rob Ristagno: Well, that makes sense. Can you say a little more about how your portfolio is deploying the capital you’re providing? Is it marketing, sales, inventory, all of the above? Is there a theme as to where
you’re seeing the capital being put to use?
Billy Libby: I’d say there’s two major areas that we’ve seen our own product-market fit. So one is in e-commerce. One of our companies called Thrasio that we were their day one investor, they are rolling up Amazon stores. So there’s 100,000 independent sellers on Amazon selling everything you could imagine, I mean, and each one of those are subscale. I really do equate it to, 20 years ago if we were doing this podcast, we’d be talking about the best idea in the world, we’re going to roll up gyms and dry cleaners and coffee shops and dog salons, that’s an institutional trade and it’s priced as such. Now what’s old is new, you start a business online but you have the same as a small business problem, right? How do you get inventory capital? How do you get growth capital? So Thrasio is going and rolling up all of these online Amazon stores and they, in under two years, will likely end this year with over a billion dollars of revenue and several hundred million dollars of EBITDA.
Billy Libby: So we invested in the business, they raised $6 million in the seed round, they bought their first assets, they hired a team, Josh and Carlos are just exceptionally seasoned and amazing entrepreneurs and people, and we gave them an $8 million credit facility to go and acquire these Amazon stores. And it worked, and they were able to improve EBITDA growth after acquisition so we scaled it to $15, we just kept giving them credit for what they were achieving, then we scaled it to $35, then to $75, so they didn’t raise another dollar of equity. So an Upper90 portfolio founder I think owns three times as much as a traditional VC company, they’re the fastest profitable unicorn in US history. But these markets are just enormous, if I told you that there’s this multi-billion dollar tens of billions of dollars of opportunity on Amazon, you’d be like, oh, that sounds like tchotchkes, like people buying paint for their kids and dog pee urination removal and honestly-
Rob Ristagno: My daughter really wants a rainbow flashlight so maybe that’s-
Billy Libby: … Right. I mean, you guys get it. So anyway, I think that area of kind of identifying and rolling up assets online. Another area we’re very interested in is helping roll up YouTube channels. There’s so many people creating content on YouTube, you can look at the number of subscribers they have, same problem, they don’t have the money to go and create new content, I mean, same stuff. So this kind of e-commerce roll-ups is a space we’ve raised an equity fund and we have a debt fund. And the other area is FinTech, companies like when I mentioned Braavo, that are factoring an app receivable, so these niche areas of FinTech where we can be an early credit partner. And I think our critical element of our model is we always do equity and debt together so if a founder works with us and in a year they can get bank debt, well, that’s an equity positive event.
Billy Libby: So we want them to get to kind of the next rung of capital faster because we’re aligned across the capital stack and we drink our own Kool-Aid, we’ve kept our fund size small. So when the founder needs a five million dollar, 10 million, 50, our goal seek isn’t to lock them up for millions of dollars. So I think everyone just over raises, like if you’re an asset manager, it’s how much AUM do you have, is like the badge of honor and if you’re a startup founder, it’s like, how much equity have you raised? And we’ve developed for our LPs mid-teens unlevered returns with quarterly coupons. I think it’s a win-win, but it’s because we have this amazing LP base where we see these deals first and we keep our fund size reasonably small and I think we can solve problems and we’re aligned, so I just think it works.
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Rob Ristagno: Now, one thing we talk about with a lot of guests on the show here is not just the tangible elements of what makes a great customer, like what industry they’re in or what problem they’re solving, but also some of the intangible, some of their attitudes, values, beliefs. Do you see trends on that dimension too when you’re investing in entrepreneurs?
Billy Libby: It’s a good question. I mean, one of the fun things for me is coming from Goldman and spending most of my career more on the electronic quant world. I come to the venture world more of a fresh lens, I didn’t grow up in that world, and Jason, having been a founder, he has different ways that he likes to help founders. But for me if I look at a portfolio, our first 12 companies in our first fund, four of them are unicorns. And if I look at the four that have broken out versus the ones that maybe have not done as well is, they are not over optimizing, they want to grow, they want to run fast, they’re not haggling over a basis point or a percent. They really want certainty of capital, they want to be able to have some flexibility to run their business and then they care about costs. And anytime we work with a company that’s trying to over-engineer and over fit, those people, I think, just don’t grow as fast and just don’t have as much success in their business and the competitors outflank them.
Rob Ristagno: Say a little more about over-engineer, over-fit, what do you mean by that?
Billy Libby: Just trying to like, what’s the cheapest capital that I can get? And wasting time on talking to everybody that’s out there. It’s like, capital’s a commodity. I mean, you’re trying to go fast in your market and you just want somebody who’s going to be able to help you do that. The cost really is not as important. And so the people that really try to fixate on costs and not on flexibility and speed, I think are the ones that I’ve seen not do as well. ClearBank is another portfolio company of ours, is another unicorn, unbelievable founders, we want to work with partners that can help us, we want to move fast and we want flexibility. And there’s other groups that I could mention that started in reverse, so like, what’s the cheapest capital? And maybe started with banks like, oh, I’m going to get 8% capital but there’s all these hidden fees and all these hidden controls. And I just think that it’s an experience maybe or it’s having gone through some painful steps here but you pay for what you get, there’s no-
Audience Member: You also have to recognize the window of opportunity. I mean, if you don’t move fast enough then you can lose an awful lot of the market.
Billy Libby: And they don’t think about like, oh, I just raised $20 million of equity, I’m going to get the cheapest debt, okay, well, what’s your total cost of capital? So anyway, I think we’ve had success with second and third time founders actually but I think it’s our job to help educate founders about capital availability, I think most founders are not aware that they can get credit and this flexible capital earlier.
Rob Ristagno: That’s a great point and a worthy mission. What are you doing to build awareness? Are you doing marketing of your own?
Billy Libby: Well, we’re trying to do more things like this, we do a lot of events with our LPs and portfolio founders. I think we’re working more closely with some of the early stage seed VCs because they’re often dilution-sensitive too, they don’t have growth funds. So the founders and the early investors taking the most risks should bear the fruits and so I’d love to go to Y Combinator and just to do a one-on-one in a debt term sheet for all the founders. So I think there’s got to be more ways to make kind of these options aware because once you raise equity, that’s it, that’s permanent.
Rob Ristagno: There’s no give backs.
Billy Libby: Right. And we’re saying you just raise less, not none.
Rob Ristagno: Questions from the audience.
Audience Member: I’m really intrigued because cost of capital, obviously, is something that we always focus on but that’s great advice not to be so focused on it that you forget everything else.
Billy Libby: Yeah. Or what’s the cost of an equity dollar? 40% forever? Anyway, we go through this with founders all the time and I think we just have to better quantify how this works.
Audience Member: Well, I’m also intrigued. You said that your LPs they kind of make introductions and things too. Is that something that you actually market to your potential?
Billy Libby: It is. And that’s really the most fun for me. We have these unbelievable dinners and events and Jason’s network in the tech world, like Nathan Hubbard started Ticketmaster and Rich Riley started Shazam and Josh Abramowitz started Bread Finance, and on my side it’s the people running some of the biggest quant funds like Millennium. And I just think when you bring together people from different backgrounds, you create new ideas and I think that’s a very big part of our ecosystem.
Audience Member: I think it’s fabulous.
Billy Libby: Yeah, it’s kind of the most rewarding. And just to give you another example, Jason is very passionate about tax, so we did a session with all of our portfolio founders because if you look on a cap table, I’m sure all of you are investors, majority of the time founders names are personally listed on the cap table, right? You get QSBS treatment where you get a certain amount if you invest is tax-free in startups but it’s a five million dollar cap but through stacking trusts you get five million times five trusts, so for a founder you can get a $25 million exemption versus five. Again, founders think about estate planning probably after they have an event, it’s like insurance, right? You want to buy insurance when you’re young not when you’re older, it’s the same thing, so these are all things that we do for our founders.
Rob Ristagno: And you talked about delaying your A, which, I love that phrase, how does this apply to more established businesses? It sounds like Upper90 is playing a lot in the post-seed, pre-A area, do these principles apply to larger organizations? Instead of going for an IPO, what should I be considering?
Billy Libby: It’s a great question. So the next product we’re launching is delay your B, so every company in our portfolio at least now has kind of got to this, they’re growing very fast, this escape velocity, and so the next step is that you go to like Tiger and you raise a $50 million series B. And as we talk to more and more of them, they’re like, I’m going to be profitable in six months or I have a new client coming on. And a lot of them have these major milestones pending, we’re like, why don’t we just do a $10 million round? And so that gets them, they’re raising at the worst threat to growth equity, like all these people that want, here’s all the data and I’m going to pile in as much money as I can, that’s been the best returning product of the planet, that’s going to change. And so we’re giving this kind of intercept equity where founders can keep growing and then kind of raise you round when you don’t need to raise. You don’t want to be raising equity when you need to raise, so that’s the next product.
Billy Libby: And then the later stage, I think it’s really relationship and special situations and I’ll give you two examples. There’s one of our LPs sold his business to WeWork and was buying it back in a very favorable way and we helped him finance that acquisition. There’s another public company I just spoke with that I can’t mention the name of, but they have kind of an onerous lender that’s just trapping a lot of their cash and if we could take out that lender it would free up tens of millions of dollars of cash for them to use on growth. So those are just special situations that I don’t think you can plan for but we have the ability to do based on our network.
Audience Member: But with that example you just described, you’re still going to establish some level of equity with them though, right?
Billy Libby: That’s correct.
Audience Member: So that you participate going forward.
Billy Libby: Yeah. We’re not a credit fund, we view credit as a tool to help founders so we’re not one of these like, oh, well, give us warrants and maybe-
Audience Member: And maybe someday.
Billy Libby: … and schmuck insurance, we’re a more concentrated fund, we invest in businesses we’re excited about. So we buy in. And so, we lean in and we put our money where our mouth is. I can’t tell you learning about this venture debt world it’s like, and I think we really want to help founders educate themselves because it’s like, well, look, there’s a term sheet here and it’s one month library but change it to three month library, you’ll pick up another percent, the founder won’t know, and I’m like, I mean, this is what happens. Like oh, I don’t really care about the warrants, well that mean something to the founder. So I don’t know, I just think this whole world is going to evolve.
Rob Ristagno: What about the growth equity people listening in the audience today? They’re probably shaking their heads and saying, well, no, equity’s better, what’s their argument against using debt instead of equity?
Billy Libby: Well again, I think there’s always a balance and there’s certain businesses that our model doesn’t work for, but all I can say is I think five of the best growth equity principals on the planet are investors in our fund as LPs so I don’t know, it kind of says something.
Audience Member: I might be over simplifying it but I’m listening to you thinking that it’s kind of downscaling the standard PE model because the PE investment is always a combination of debt and equity, this is bringing it down into a smaller transaction maybe at a venture stage company rather than a PE stage company, but am I missing the point there?
Billy Libby: No. I think you’re right. There’s an amazing article about Tiger recently, bigger, better, faster, private equity is like, we’re smarter, we want to control your business. Half of our returns are how it’s structured on the initial investment prefers and liquidation preference, we want to find great founders, help them grow faster, just do it with a combination of debt and equity. So it’s really just like a better VC in some ways but I think it is some of the structuring components that you’re talking about. And I think when we started Upper90, because my background and Jason’s in kind of e-commerce marketplace we have another partner Alex who comes from the credit world, we started our fund with that DNA of being able to do both and I think most funds do one, they have conflicts or they’re credit or they’re equity.
Billy Libby: I don’t know, maybe family offices can do this but I just think most funds do one. Even private equity is still equity, it’s like, let us get our equity filled and then we’ll get you a cheap debt, it’s still that mantra. I don’t know, I mean, it’s not as simple as that but I mean, I think the goal seek of growth equity and private equity is to put as much money into companies as possible in equity. And also, I guess one more point on this is, because of our model every company doesn’t have to be a unicorn because we’re getting in early. So one of our companies called Coastline, these guys from the tech world and they saw that the student driver world, it’s a government mandated program but it’s private industry, so each city has the driving school small business.
Billy Libby: And it hasn’t been updated in 50 years, everyone has their crappy car and so they’re like, we’re going to get everyone a Prius, there’s going to be an app to connect students and drivers, there’s going to be upsells. So they’ve sort of built a digital first drivers ed school and they are already profitable, growing rapidly. Their big expense is the Prius, which they were using equity for, so we stripped it out and we gave them a facility to buy Priuses, which on their own are collateralized, and then we were able to help them grow and now they’re not just doing their own in cities they’re actually now going and buying legacy ones, which we created another facility for to do acquisition role. So I think a lot of the times companies may outgrow and get to bank debt but then they always have another product so it’s nice to have somebody who’s kind of a flexible partner to help you capitalize on new ideas when you’re kind of evolving in a new market.
Audience Member: It’s a really good example.
Billy Libby: That all of these deals came from our LPs.
Rob Ristagno: What else is next for Upper90?
Billy Libby: I think there are ways to partner with our portfolio companies to create new businesses. So what I love about our model is we’re getting paid to learn, through our debt you kind of get insights and you see how companies are doing, in most businesses you pay to learn. And so what more can we do with that data? So can we, ClearBank sits on more data than tens of thousands of companies using ClearBank for marketing, can we create a VC with them in a partnership? When Thrasio is buying all these Amazon stores, a large number of sellers don’t want to sell but they need capital so can we create a new company with Thrasio to do lending not buying? So I think maybe incubating businesses.
Billy Libby: I don’t really have any interests building a multi-billion dollar asset manager, I think that that world is well serviced. And I think that we get into the same conflicts, like crap, like at Coastline we gave a five million dollar facility to and it really is growing, if I had a huge fund how do you take 50 in? Your goal seeks become different. So I think staying early and over time maybe incubating businesses as well or partnering with our portfolio companies.
Rob Ristagno: Excellent. We have time for one more question from the audience.
Audience Member: I’m just fascinated because I see it as a newer model of a venture without some of the downside, I mean, that’s awesome.
Billy Libby: It’s really fun, I mean, we have a great group of people and I guess what I learned is everyone rushes to get endowments in institutions but they want you to be in a box, they want you to like, just do like this, and I think the flexibility is really the most important thing because each company has a different problem.
Rob Ristagno: That’s actually your Netflix home screen.
Billy Libby: It’s good, that’s what I mean. Our lives have become hyper-personalized but the financial world is not yet.
Audience Member: Right. Well, we always found that we didn’t have the skillsets in everything. You might have the technical, you might have the operations but you don’t have the financial so if you’re bringing that to the table too that’s a big, big help.
Billy Libby: Yeah. That’s a big part for us. We’re almost going to be the theme code of these really great tech companies. Yeah.
Audience Member: Love it.
Rob Ristagno: I think it’s a bigger piece than most entrepreneurs realize and I know that in business school you learn what working capital is and there’s a line in the spreadsheet and you mathematically know how it works but when you’re actually running a business, it’s real, and I think bring capital growth, capital, all these things, it’s a big problem and I can see your point that every company needs to become a FinTech company to really figure out how to grow.
Billy Libby: Yeah. One of our founders needed cash to exercise his warrants, his stock grants, he had $150 million of stock, he needed five million dollars to exercise this. I mean, but this is a super low LTV loan but I think the key is you have to be able to underwrite the business and the assets and that’s really important. Because if everyone had all the same data banks would do this, but is it a good business? How do you form that opinion? That’s still subjective. So I think that our DNA of our company kind of has been debt and equity kind of has an ability to look at things a bit more broadly than a traditional investor would. But I think equity investors are the best investors because you have to see something that others don’t.
Rob Ristagno: Billy, this has been very interesting, very informative, we really appreciate you spending time with us.
Billy Libby: Of course. Thanks for having me. And it’s really nice to meet everybody on the call.
Rob Ristagno: Is there something we could do or our audience could do to help you out?
Billy Libby: I just think it’s all about finding interesting companies at the right time. If this has made you think about a company that’s growing or trying to solve a challenge and is kind of at an inflection point, just think of us and I think we can help try to see if there’s a way to be involved. And if you’re interested in kind of our products, we’d love to introduce you to our community and think of you for future deals. So yeah, reach out and we love to work with smart people in different industries.
Rob Ristagno: Thank you Billy Libby, CEO of Upper90, check them out at upper90.io. And this concludes this week’s CEO Campfire Chat with your host Rob Ristagno. To listen to more episodes or sign up for bonus content visit ceocampfirechat.com. See you next time around the fire.
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