Angel groups in the 1990s were based on the sponsor model. In the 2000s they moved to the membership model. Today, they operate on the syndicate model. Investors line up around deals by sector and stage to share the funding round.
TEN Capital now has a series of syndicates and one of the most popular is the TEN Income Syndicate which funds deals generating income for the investor rather than long term gains. While most angels still want to hold equity in a startup, there is a portfolio play here by diversifying some of your investments into cash generating investments.
The TEN Income Syndicate provides monthly or quarterly income from investments from loans and revenue based funding deals. The criteria for revenue-based funding investment includes:
- $1M revenue run rate
- Tech-enabled business
- Gross Margin > 50%
- Growth rate > 30% annually
In a revenue-based funding deal, the company pays back a percent of revenue each month till a predetermined return is achieved.
The TEN Income Syndicate uses a 3% scaling to 5% payback rate. For a $100K investment example, the payback plan is an initial revenue payout percentage of 3% of gross sales that scales to 5% by year 2.
Year 1 – at least 35K
Year 2 – at least 65K
Year 3 – at least 70K
Year 4 – at least 80K
Plus 1-2 points of equity (listed as a warrant)
Payback in 3-5 years
Early payback comes at a lower return.
The turnaround on an RBF deal is quite short compared to an equity deal. Funding decisions are made within 5 days of submitting financials and funds are transferred within 10 days of a funding decision.
You can learn more at this link: http://staging.startupfundingespresso.com/ten-income-syndicate
Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies.
