The following is a summary of writings by Indie.vc and its founder, Bryce Roberts:
There are countless OGs including Qualtrics, Github, Atlassian, Mailchimp, and Spanx and a new guard like Calendly, Zapier, Webflow and Notion all with a focus on early profitable growth. Having spoken to many of these founders and CEOs, none would trade that early foundation of customer needs and profitable growth they were built upon.
This strong foundation stands in contrast to the Blitzscaling playbook we’ve engineered our entire startup ecosystem around. We optimize our blogposts, livestreams, and tweetstorms around how to raise as much money as possible as quickly as possible. Rather than a solid foundation, Blitzscaling is oft described as “throwing yourself off a cliff and assembling your airplane on the way down”
And the results of that model reflect it, with around .1% of companies who raise venture capital ever actually achieving venture scale.
Clearly, Blitzscaling is a viable blueprint for a select few to follow to grow their business and ultimately reach venture scale. But, it isn’t the only viable path, nor is it the only one we should orient our startup ecosystem around.
As Qualtrics’ experience and outcome demonstrate, not raising and burning piles of money doesn’t have to be a scarlet letter for the unfundable; rather, removing the distractions that come with the fundraising treadmill can be a superpower for many to reach venture scale without the pressure to Blitzscale.
. . . .
The Indie.vc Model
Traditionally, technology investors only get their money out when you sell out (another term for this is a “Liquidity Event”). An investment from Indie.vc doesn’t preclude you from selling, but in the event you stay independent, our investment will get paid out as distributions from cashflow over time.
The schedule for cash distributions will be based off the founder’s salary at the time of funding or, in the case of a founder paying themselves far below market, based on a market salary for founders in your area. Once the founder’s salary exceeds 150%, we will consider that excess distributions and begin to participate in those distributions. Initially, we will get 80% of those distributions while the founders take 20% until our initial investment has been returned 2x. At 2x the model flips to 80% to founders, 20% to indie.vc until we’ve received 5x our investment. Distributions to Indie.vc are capped at 5x.
Only if and when you choose to raise more money from traditional investors or sell out do we become shareholders in your company.
In the event you choose to raise money, our initial investment would convert into pre-money preferred shares (assuming you’re issuing preferred shares to the new, lead investor) in your company and we’d have a pro rata right to participate in the round to preserve our pre-determined ownership level.
In the event you choose to sell out, we’d convert into common shares at the pre-determined ownership level just prior to the acquisition.
So, what is this pre-determined ownership level?
Given that this is an experiment, we thought it only fitting to push the experiment one step further by trying something new. Rather than having us specify a minimum ownership level, we’re going to let the founders determine what ownership percentage they’ll contribute.
A simple summary of these terms can be found in the Google doc posted here.
Then, Indie.vc shut down: https://bryce.medium.com/what-ended-indie-76575463934d
Then on 12/23/22, Bryce Roberts sent out an email announcing its resurrection:
In a year where liquidity all but dried up for startups and investors, our indie-focused fund was able to return/recycle nearly 20% of the fund via scheduled equity redemptions and proceeds from acquisitions. One of our indie companies crossed $50M in revenue (having only raised $1M total). Today, that fund is posting a 45% net IRR.”
Despite many of the issues that ultimately led to indie’s demise, it’s working. Sure, some things needed killing or tweaking. But the core thesis and community were just fine all along.
So we’re rebooting indie.
After over a year of exploring and investing, looking for my next thing, I just can’t shake indie. It’s the only thing I want to work on. It’s the only way I want to invest.
We’ve closed around $20M of our $50M target. Individual and institutional investors seem much more inclined to lean into the indie story today than the last time around.
We have a long way to go, but my hope is that we’ll be relaunched and making new investments in late Q1/early Q2 of 2023.
— Bryce