Relevance of Aligned Financing
In the journey of entrepreneurship, while finding capital, it is about ensuring that the core design of a company – the very DNA of an enterprise – remains supportive of its vision. There is not a one-size-fits-all solution when it comes to financing your business – it is upon you to find out what aligned financing means to you.
Every company is unique, with its own vision, mission and purpose. To truly succeed, it’s essential to find financing that not only meets your needs but also aligns with your values and your vision for the company and your role in it. This means stepping away from supposedly simple, “normal” paths and instead focusing on what truly matters: finding ownership and financing structures that are coherent with your values of stewardship and entrepreneurship, the economy you want to build.
The ownership and financing structure of your company is the deep design, the DNA of your business. This deep design forms the foundation and framework that shape your company’s culture, long-term purpose, and business operations. If your financing model doesn’t fit, the misalignment can undermine your business’s potential, leading to friction and possibly even failure of the business – or your vision for it – down the line.
For more and more entrepreneurs, the “standard” conventional investment forms build on the need for exponential growth, shareholder value primacy over purpose-orientation and the logic of speculatively selling a company doesn’t fit what they want to build anymore. As startup founder Ines Schiller (VYLD) put it, “it just doesn’t make sense to produce a great, sustainable product but then have an exploitative company structure and culture.” While conventional equity investments, venture capital and private equity can work well and be the best fit for some entrepreneurs in their company, as VC investor Albert Wenger stated, (conventional) “VC capital is a hammer, a big and strong hammer. But not every company is a nail.” Only very few companies are typical venture capital or private equity cases. These forms of capital are tuned to be working for a very specific type of company and don’t work or are not wanted by many others.
Different companies need different solutions – and the landscape of financing has become disproportionately skewed towards conventional equity investments being the only solution out there. It’s time to burst this bubble and recognize that many other finance models exist. Models that could, for some of you, be a better fit for your business. Venture capital and private equity are great for some companies, but they are not the only “normal” form of investments, they are just one model amongst many others.
Between traditional bank loans and conventional equity, there is a spectrum of financing options that are often overlooked. Astrid Scholz from Zebras Unite describes this spectrum as an ice cream shop – there is not only vanilla or chocolate ice cream, but instead you can freely decide on the type of ice cream you want. This area between conventional equity and traditional bank loans is rich with possibilities for entrepreneurs who need something different – something that aligns with their unique business model and mission. Like choosing from a variety of ice cream flavours, finding the right financing means exploring these alternatives, understanding the nuances, and selecting the one that suits you best. And it means taking back the power to choose and design a financing solution for your company instead of following the treadmill.
There is not only vanilla or chocolate ice cream, but instead you can freely decide on which type of ice cream you want.
Astrid Scholz, Zebras Unite
It’s not an easy path. Finding aligned capital may be more challenging than securing conventional venture capital, but in the medium to long term, it can be the difference between staying true to your mission and being forced down a path that doesn’t feel right.
Moreover, investors are also beginning to seek alternatives. There’s a growing recognition that the way we talk about purpose or impact (what we invest in) and the way we invest capital (how we invest) needs to align. It’s time to look ourselves in the eyes and admit that the current mainstream investment models do not always serve purpose-driven companies well.
In the end, it’s about finding coherence. Coherence between your vision as an individual, your goals as an entrepreneur, and the financial structure that will help you realize those goals.
So the question is: What kind of capital do you really need and want? This can be steward-ownership-aligned financing – but can also be something completely different.