#121: Avoided a VC Round Using Royalty-Based Funding With No Equity Dilution – Vince Hsieh

#121: Avoided a VC Round Using Royalty-Based Funding With No Equity Dilution – Vince Hsieh

Author: Greg Head December 6, 2024 Duration: 1:05:36

Vince Hsieh is a two-time entrepreneur who has started, grown, and sold two industrial tech companies that included software and either an RFID or GPS device in the solutions. His second venture, Geoforce, raised a non-dilutive funding round to accelerate global growth before being successfully acquired by private equity investors LLR Partners in 2019.

Their royalty-based funding round allowed Geoforce to skip a VC funding round, preserving founder equity and fueling their growth. After their acquisition, Vince shares that the founders saved tens of millions of dollars in founder equity value with their non-dilutive funding from Cypress Growth Capital.

Vince eventually joined Cypress as a general partner, working with capital-efficient SaaS founders to help them build more enterprise value. Vince shares how royalty-based funding can be a very useful funding approach in specific situations.

Quote from Vince Hsieh, partner at Cypress Growth Capital

"Skipping a VC found by using non-dilutive funding made a huge difference to us at Geoforce, especially compared to my first startup where we did not have royalty-based funding in the middle from Cypress. We had just venture capital and then eventually sold to private equity.

"So the math of royalty-based funding is amazing because from the time of our funding from Cypress to the time we sold to private equity, our equity, our value more than 10x'd. But we didn't pay back Cyprus anything close to 10X.

"Had we raised several million dollars in VC funding with equity, there would have been easily tens of millions of dollars of difference between having done royalty-based funding and equity funding. And that tens of millions of dollars of difference went into our shareholders' pockets, including the founders and our friends and families who invested earlier."

Links

Podcast Sponsor – Cypress Growth Capital

This week's podcast is sponsored by my friends at Cypress Growth Capital. For 15 years, Cypress has provided non-dilutive growth funding to bootstrapped SaaS founders, including many successful founders I've interviewed here on this podcast.

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Greg Head hosts the Practical Founders Podcast, a series dedicated to the often-overlooked builders in the technology and business landscape. Each week, the conversation focuses squarely on founders who have successfully scaled their software companies through means other than massive venture capital. You'll hear detailed, candid stories about bootstrapping, profitable growth, and the strategic choices that define a sustainable enterprise. These interviews dig into the real work of building a valuable company-the early decisions, the pivotal mistakes, the practical systems, and the personal resilience required. It’s for entrepreneurs and operators who are more interested in durable ownership and practical execution than in hype or fundraising rounds. By focusing on firsthand experiences, this podcast provides a grounded perspective on entrepreneurship. Listeners gain actionable insights and honest reflections from leaders who have navigated the complexities of building a business on their own terms. The discussions are in-depth and specific, offering a valuable resource for anyone looking to understand the tangible realities of creating a technology company without relying on external funding. This is where the conversation moves beyond theory into the applied lessons of proven founders.
Author: Language: English Episodes: 100

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