How is Villagers different from a VC?
There are two main differences between Villagers and a traditional VC fund:
What we invest
VCs provide cash to fund product development, and expect founders to learn how to run product engineering teams along the way.We believe there is enough to think about already when starting a new business, so instead of cash, we bring established product, design and engineering teams, and invest our time in building your product - while you focus on GTM strategy and growing the business.
How the investment is repaid
VCs buy equity in your company, and their investment is repaid when they sell that equity to a third party. Their goal is to sell their equity within 7-10 years, for as much as possible. You don't have to repay the VC yourself, but you might find yourself being pushed in a direction you don’t want to go, or to take an exit you’d rather not, in order to meet the VCs goals.
Villagers' investment is repaid in cash, by you, once you start making money. We charge “interest” on the amount invested, which is how we make money and amortize losses. We take repayments as a share of your revenue. Once the amount invested plus the “interest” is paid, the repayments stop and you keep all your revenue (and all your equity!).
Why do I have to repay you? I thought you were an investor!
All investors expect their principal to be repaid, plus a return.
An investor who buys equity in your company (e.g. an angel investor or VC) gets repaid when your company is acquired or has an IPO. The money that goes to the investors at that point is money that would otherwise have gone to you, the founder(s).
We believe that repayment through revenue sharing better aligns our incentives with yours, and lets founders retain as much freedom, control, and upside as possible.
Not being dependent on an exit to see a return also significantly broadens the types of opportunities we are able to invest in, which helps improve our deal flow.
How much will I end up paying?
Our term sheets include a dollar estimate for the cost to build your product. This is the amount we are “investing”. This number will not change if the project runs over time.
The total amount repayable is a multiple of this dollar estimate, typically 3-4x, depending on our assessment of the risk of your business being unsuccessful. We believe this is a fair deal for all parties, and in-line with industry norms.
If my company doesn’t succeed, do I still have to pay you back?
No. We know that even the best laid plans don’t always work out, so our model is designed to absorb and amortize the cost when things do go wrong.
How long will it take to repay Villagers?
We target a repayment schedule of 3 years.
Before offering investment, we will work with you to ensure this timeline is feasible, based on your product pricing, growth trajectory, and operating costs.
If you grow faster than expected, payments end early.
Why do I have to make a down payment before starting the Tree of Life?
The short answer is that we need you to have skin in the game.
All of our operating costs are covered by our share of our portfolio’s revenue – we don’t have income in the form of management fees (charged to LPs) like a traditional VC fund. This means that any time spent away from helping our portfolio companies succeed has a very tangible cost.
We ask for a down payment in cash as it is a universally applicable show of good faith. We have found it to be a very effective first step towards a truly collaborative working relationship.
In special cases, we may be able to waive this payment, depending on the stage and complexity of the venture. We will discuss this with you during our first call.
Can I do the Tree of Life without applying for funding?
Yes! We believe the Tree of Life is a valuable exercise that helps founders plan out their next steps, whether or not we take those steps together. In fact, some of the best feedback we have had on the Tree of Life has come from companies that we weren’t ultimately able to fund.
We charge $7500 for this service. You can expect us to ask for 1-3 hours of your time, every day for a week, and we’ll be doing our own research/planning in between. At the end of the exercise we’ll provide you with a detailed write-up of everything we discussed, and the Tree of Life itself.
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