Fintech

VCs are supposed to be patient money. What if they need cash now?

Pipe, which started out helping venture-backed SaaS companies turn future revenues into capital, is now helping investors too.

Harry Hurst, CEO of Pipe

Pipe co-CEO Harry Hurst has a deal for VCs.

Photo: Pipe

Pipe built a $2 billion business by turning companies' ARR into cash advances with the promise of repayment down the line from a growing stream of customer payments. But in a deal with AngelList, Pipe is targeting a new kind of business: venture firms.

While venture firms don't have the same notion of "revenue" that you'd see at a software startup, venture firms do get management fees, paid by their LPs over time, to cover the cost of the firm's operations. Now Pipe is giving general partners the chance to take more of those management fees upfront.

"For a GP that draws a management fee in cash over a number of years, Pipe provides a way for them to access that capital upfront for a number of use cases, for example, but not limited to, diversifying their personal investments into spaces outside of their fund's investment thesis, using the capital for a down payment on a house and investing into operating expenses like staffing to scale up for the next fund," Pipe co-CEO Harry Hurst wrote in an email to Protocol.

Venture funds typically operate under a "2 and 20" fee structure where firms receive 2% of the assets under management as an operations fee and 20% of the profits on exits. For larger funds or well-established firms with multiple funds, that 2% management fee can be plenty of money. But smaller funds and emerging managers have had to get creative on how to get more funding upfront to cover the cost of launching operations.

Some smaller funds, for example, charge 3% fees and front-load fees to offset initial costs. In a much more unconventional path, both Backstage Capital and Earnest Capital conducted crowdfunding campaigns to help raise money for operations in exchange for future profits.

The Pipe-AngelList deal will provide venture funds with another option: GPs can pay a small fee to Pipe and get up to four years of management fees in advance. It's not a loan and there's no interest, according to AngelList. (Revenue advances or merchant cash advances, as products like this are known, are generally viewed as the sale of future revenue and hence a commercial transaction versus a more heavily regulated loan.)

For Pipe, it's a push beyond its original market of SaaS companies. While Pipe focused on that market at first, Hurst said that more than 50% of its business now has evolved into other categories: direct-to-consumer companies, streaming services and even service-based businesses like pest control and gyms. While venture fees may not be a traditional "revenue" stream, for Pipe, it's another flow of cash it can tap in to.

Workplace

An IPO may soon be in Notion’s future

Notion COO Akshay Kothari says there’s room to grow, aided by a new CFO who knows how to take a company public.

Notion has hired its first chief financial officer: Rama Katkar.

Photo: Courtesy of Notion

It’s been a year since Notion’s triumphant $275 million funding round and $10 billion valuation. Since then the landscape for productivity startups trying to make it on their own has completely changed, especially for those pandemic darlings that flourished in the all-remote world.

As recession looms, companies looking to cut costs are less likely to spend money on tools outside of their Microsoft or Google workplace bundles. Enterprise platforms are bulking up and it could spell trouble for the productivity startups trying to unseat them. But Notion COO Akshay Kothari says the company is still aiming to build the next Microsoft, not be the next Microsoft. And in a move signaling a new chapter of maturity, Notion has hired its first chief financial officer: Rama Katkar, Instacart’s former VP of finance.

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Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

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James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Securing the Enterprise

Securing the enterprise

There’s no let-up in the surge of cyberattacks against businesses. But shutting down the hackers will require many enterprises to evolve their strategy.

In today’s enterprise, “identity and security are very merged.”

Illustration: iStock/Getty Images Plus; Protocol
the Protocol team
Protocol focuses on the people, power and politics of tech, with no agenda and just one goal: to arm decision-makers in tech, business and public policy with the unbiased, fact-based news and analysis they need to navigate a world in rapid change.
Fintech

How neobanks are helping consumers game credit scoring

The CFPB says it is closely monitoring secured credit cards offered by neobanks.

Regulators are scrutinizing neobanks' card offerings.

Photo: Oscar Wong/Moment/Getty Images

About one in six Americans has a credit score below 619, according to the CFPB. Another 23% have too thin a credit file to score or no file at all. That puts them in a credit trap: To build credit, these consumers need someone to give them a line of credit with which they can demonstrate good financial habits. But with scores that low, few lenders are prepared to offer them anything.

Neobanks say they can solve the problem through a new twist on secured credit cards. But regulators are already scrutinizing their offerings.

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Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

Policy

Steel decided World War II. Chips will decide whatever is next.

“Chip War: The Fight for the World’s Most Critical Technology” foreshadows the coming battle between nations over semiconductors.

“Chip War” outlines the nature of the coming battle over semiconductors, showing how the power to produce leading-edge chips fell into the hands of just five companies.

Image: Scribner; Protocol

“World War II was decided by steel and aluminum, and followed shortly thereafter by the Cold War, which was defined by atomic weapons,” Chris Miller, a professor at Tufts University’s Fletcher School of Law and Diplomacy, writes in the introduction to his latest book. So what’s next? According to Miller, the next era, including the rivalry between the U.S. and China, is all about computing power.

That tech rivalry and the story of how the chip industry got from four to 11.8 billion transistors are all part of Miller’s book, “Chip War: The Fight for the World’s Most Critical Technology,” which comes out Oct. 4. “Chip War” outlines the nature of the coming battle over semiconductors, showing how the power to produce leading-edge chips fell into the hands of just five companies: three from the U.S., one from Japan, and one from the Netherlands.

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Hirsh Chitkara

Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He's based in New York and can be reached at hchitkara@protocol.com.

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