Happy Sunday, friends! The shift toward non-dilutive funding and the proliferation of new models around the world continues (see articles below) as RBF and other models are launching at a breakneck pace. Generally, this is a good thing because I strongly believe that entrepreneurs should have multiple funding options available to them as they grow their businesses. 

Is there another side to that coin, though? You see, recently I’ve seen dozens of entrepreneurs looking for a way out of funding relationships with short-term lenders masquerading as entrepreneur-friendly non-dilutive RBF capital. These entrepreneurs end up with punishing debt repayment cycles that are so short that they do not have time to use the capital they’ve taken, completely inhibiting their opportunity to grow. It looks to me like many newer market entrants - and several of the loudest and fastest growing players in the market now too - talk a great game, but are not really focused on the best outcomes for entrepreneurs. 

On top of that, I wonder about the impact that a proliferation of funding models that prioritize speed of capital deployment over sound underwriting will harm the market over time. That is, if speed is prioritized over underwriting, will there be a reckoning as portfolios underperform, and if so, what will be the impact of that on the long-term growth of the alternative funding industry? Does a “growth at all costs” mindset carry a significant cost after all?

I could be wrong about these questions, but I’m thinking a lot about this lately. Drop me a note and let me know what you think. Maybe it’s time to have a panel discussion about this?

On a sunnier note: go Chiefs!