[HN Gopher] Launch HN: 8vdX (YC W22) - Venture debt to complemen...
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Launch HN: 8vdX (YC W22) - Venture debt to complement a seed round
Hey HN! We are Ravi and Vijay from 8vdX! (https://www.8vdx.com/) We
are building a founder-friendly venture debt marketplace for early
stage startups. We also provide seed-extension debt to breakout
companies to extend their runway to get to a better Series A raise.
Our mission is to be the preferred debt partner for high growth
startups and scale with them as they grow from seed stage to Series
A and beyond. Vijay and I were both working at Eight Capital, a
high yield fund that I cofounded, when we gave a bridge loan to
Kodo (a startup from YC W21) to support their high growth rate
while they were getting their YC funding. Kodo is an Indian company
and had to complete some standard processes for that to happen, but
they needed money right away. Our loan allowed them to accelerate
their growth and they ended up having an amazing Demo Day result.
We wondered, could this be repeated with other startups or was it a
one and done investment? We looked at publicly available data and
quickly came to the conclusion that we could indeed underwrite
venture debt to seed to early stage startups. That was the genesis
of the 8vdX venture debt marketplace. We launched 3 months ago and
have already provided venture debt to 16 startups. In good YC
fashion, we've been focused on our batchmates to begin with :) But
we believe this model can scale beyond the YC ecosystem and we're
very interested in that. Why do we think this makes sense right
now? Seed rounds today are the same size as Series A used to be a
decade ago. But there are no existing players who provide venture
debt to early stage startups. Last year, seed and early stage and
Series A startups raised ~$100B from equity investors. Venture debt
can be up to 25% of the balance sheet of these rapidly growing
companies, making this a $25B annual opportunity in this
underserved market. Our loans are founder friendly. We do not
force founders to open captive bank accounts, cash flow sweeps,
take personal guarantees of the founders, or force the startup into
bankruptcy if the startup is unable to repay. We have a simple and
transparent application process to receive funds through the 8vdX
digital platform. Currently, startups can apply digitally for up
to $150k of debt by visiting our startup portal at 8vdx.com, and
upon approval, the funds are wired to their account on the same
day. 8vdX has a capital-light business model as the venture debt to
the startups are entirely funded by angels and institutional
investors through the marketplace. We have a deep product pipeline
which includes multi-currency venture debt that can be extended on
day zero to international companies. We will be supporting local
currency venture debt for startups in India, Australia, United
Kingdom, Mexico and Indonesia for the YC S22 batch and our goal is
to support even more countries in the future. We are also inviting
platform partnerships from online investment apps to distribute the
8vdX venture debt offering to their clients. Vijay and I look
forward to hearing your ideas, questions and feedback. Thank you!
Author : rchachra
Score : 60 points
Date : 2022-03-09 09:47 UTC (13 hours ago)
| threefiftyone96 wrote:
| Really interesting value proposition for founders!
|
| How is the reception among the new batches of YC?
| rchachra wrote:
| Thanks, we are seeing strong traction both from the current
| batch as well as break out companies from recent batches.
| refrigerator wrote:
| FYI - it would be good to include a link to your site in the
| first paragraph -- took me a while to find "8vdx.com" in the
| final paragraph, which isn't clickable.
| rchachra wrote:
| Great idea! Thank you.
| jacob_rezi wrote:
| Hello,
|
| This is a fantastic idea and the value it creates in the right
| situation is huge. Can I ask, how is it different than Pipe? At
| face value their solution appeared great but the terms for
| qualification seemed to be unaligned with companies.
| rchachra wrote:
| Thank you! Pipe is revenue based financing focused on SaaS
| companies (Bill discounting) which means the company is
| pledging their revenue stream to Pipe. The 8vdX early stage
| venture debt is unsecured with founder friendly terms which
| includes 0% cash interest (we can take SAFE instead) and
| conversion of principal into equity instead of repayment.
| ianbutler wrote:
| Hey This is very interesting. Im curious about what the due
| diligence process looks like to underwrite the loans for these
| businesses. Is there any research done into the space the company
| is in on your end, or is it purely based on their books and
| projections?
| rchachra wrote:
| Thanks, for bridge to Demo Day loans we are underwriting the YC
| program. For seed extension debt-these companies are still
| young therefore, our analysis is also betting on traction,
| quality of founders and investors on the cap table. However,
| for later stage loans we underwrite on the basis of both a top
| down as well as bottoms up analysis.
| davehcker wrote:
| Waiting for someone to build something like this for founders of
| any promising startup out there (and not just YC startups). I
| totally understand the current choice of sticking to YC startups
| though. But do you imagine accepting non-YC startups sometime in
| the future?
|
| I am a first-time founder of a deep-tech, and having secured pre-
| seed 6 months ago, and now that I have gathered all the evidence
| for the viability, I would definitely consider approaching
| something like 8vdX.
| rchachra wrote:
| Yes, absolutely! We look forward to working with all promising
| startups as we scale our business.
| dustingetz wrote:
| interest rate? assuming this is cash advance credit rates for
| short term loan? so the loan is specifically designed for cos
| with low cash position heading into a fundraise?
| rchachra wrote:
| We are taking SAFEs in lieu of cash interest for seed stage
| companies. For later rounds there is flexibility given to the
| company to optimize the cash interest versus SAFE based on cash
| flows of the company.
| e1g wrote:
| Can you give a specific example of how I will pay you back
| after I borrow $100k?
|
| It sounds like I have to return the $100k, plus some
| percentage of equity (in lieu of interest). If so, this
| sounds like an option for angels to take a position in a YC-
| backed company, and it would be friendly towards founders to
| label this product as equity financing and describe how the
| equity percentage is calculated.
| rchachra wrote:
| When you borrow $100k you repay the principal or $100k
| after your Demo Day fund raise and in lieu of interest we
| will receive a $20k uncapped MFN SAFE. In case the startup
| fails to raise sufficient funds to make the repayment, then
| the entire principal will be converted in a SAFE at a pre-
| agreed cap.
| GordonS wrote:
| Sorry, what are "SAFE" and "MFN SAFE"?
| zachthewf wrote:
| Safes are the most common way for startups to raise seed
| today. You can read about them here:
| https://www.ycombinator.com/documents/#about
| dustingetz wrote:
| What is the repayment term, 3 months?
| rchachra wrote:
| 6 months is the standard Demo Day note but can be reduced
| to 3 months on a pro-rata basis.
| lizen_one wrote:
| I would be interesting if you could describe how it exactly
| works. Can you give us a little more color on that?
|
| 1. You mentioned that this only a marketplace between lenders and
| startups. Does a startup create a kind of brochure describing
| their idea trying to lure in lenders (like kickstarter or other
| crowdfunding/lending sites)? Or does the startup just fills out a
| form and then you decide about the loan? In this case, how do the
| lenders decide if the want to give this startup money?
|
| 2. Who decides if a startup gets money?
|
| 3. What exactly is your part in this process? Do you quantify the
| risk, so lenders can only give money to startups in a certain
| risk category?
|
| 4. What happens if the startup fails? Who has lost money? You or
| the third-party lenders?
| rchachra wrote:
| Sure, 1. Here is a link
| (https://docsend.com/view/gtxd9jwdgs3izb8m) to the explainer
| for the bridge to Demo loan. 2. All companies presenting on
| Demo Day are automatically qualified. Later stage companies are
| underwritten on a case-by-case basis by the 8vdX team. 3. Yes,
| we act as underwriters and originate companies that we strongly
| believe will be able to raise their Series A rounds. 4.
| Investors invest at a portfolio level for each batch therefore
| there is an expected failure rate built in to the return
| assumptions
| lizen_one wrote:
| Thank's a lot. This document really makes it clear how it
| works. Awesome idea!
| rchachra wrote:
| Thank you!
| sam0x17 wrote:
| Vijay+Ravi, I work with a large number of seed and pre-seed (many
| YC) startups who are in tough financial situations -- would love
| to see some kind of referral program as I will probably be
| referring a high volume of startups to your service! It looks
| fantastic!
| rchachra wrote:
| Sure, we will be happy to take a look. Though, our program is
| more for companies that have found PMF and the seed extension
| debt will allow the startups to accelerate their growth & for
| the founders to minimize their dilution when they raise a more
| successful Series A round.
| sidgarimella wrote:
| Excited to see this on HN, congrats on the launch!
| rchachra wrote:
| Thank you!
| vijay_lavhale wrote:
| Thank you!
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(page generated 2022-03-09 23:01 UTC)