One (round) and Done

Just as we’re running out of derivatives for “seed” and letters in the alphabet there’s a new funding trend emerging.

Call it Bootstrap+, Fundstrapping or Series 1 and done, there seems to be a move towards simplifying the various funding schemes and getting down to the business of building a real business.

In their funding announcement last week, the Text IQ team was careful to note their profitability. And not just a token “ramen” level of profitability:

The startup is profitable, with January revenue of 10x its burn rate and sales expected to be in the millions for the quarter.

Interestingly, and relevant to this trend, they’re viewing this as a strategic round of funding and possibly the only round they’ll raise:

Text IQ is profitable. And for its first outside funding, it’s taking only about $3 million from top investors and veteran legal counsels in a seed round its founders say could be the only money it ever needs.

Funny thing is, they didn’t appear to “need” the money.

Unlike many startups who will go out of business if they aren’t able to raise another round, Text IQ seems to have a more specific need with this raise; namely, to get certain skills, expertise and networks around the table and invested at different level as they build their business

Through our work with Indie.vc we are seeing this trend at an increasing rate.

It’s an appealing path.

Founders can trade the fundraising treadmill for the freedom, control and ownership that comes with managing your cap table closely. Reliance on revenue keeps them close to their customers. And it rewards that early, and often painful, focus on revenue and sustainability with less dilution and more optionality.

I’d wager that we’ll see an increasing number of the best and brightest founders choosing this route in the near future.

In fact, we’re betting our business on it.