November 16, 2022
Happy Hump Day, Retail readers.
📅 Situational awareness: Today at 12:30pm ET, Richard speaks to AB InBev global chief marketing officer Marcel Marcondes and Media Deals' Kerry Flynn talks with Spotter CEO Aaron DeBevoise. RSVP.
1 big thing: Upper90 targets $350M for credit fund
Upper90, a New York-based hybrid credit firm, intends to raise a total of $350 million, its co-founder and CEO Billy Libby tells Richard.
Why it matters: Alternative financing for digital startups has been fashionable through the second half of this year as traditional growth equity has been more difficult to come by.
Details: Upper90 completed the first close of its third fund at around $180 million in August.
- The firm has $1.2 billion in assets under management and investments in 43 portfolio companies primarily in e-commerce marketplaces and fintech.
- In Q3 of this year alone the firm has seen more than 75 deals, consistent with its quarterly deal flow figures, Libby says, supporting his thesis that there is a trend for equity and credit.
The intrigue: Upper90 has focused on providing asset-backed lines of credit with a small equity component since its first fund in 2018, Libby says.
- And with equity more expensive now, the firm is seeing an increase of deals seeking credit, he adds.
- The investor also seeks to target roll-up strategies that he says are growing in popularity.
Of note: The third fund's LP base consists of about 300 entrepreneurs, where a majority of Upper90's deals also originate, Libby says.
How it works: After finding that founders were giving up on average over 50% of their equity following Series B rounds, Upper90 saw an opportunity to provide lending backed by some sort of asset, whether it be inventory, receivables or equipment.
- The idea is to delay the Series A with investments that are 90% credit and 10% equity that can be as little as $5 million to $10 million, Libby says.
- Companies need a proven concept and clear assets or collateral.
Following in the footsteps of Amazon aggregators, startups are emerging that plan to consolidate businesses such as affiliate websites to gain access to those user bases or app creators in the Apple ecosystem.
- There are also opportunities to consolidate software providers within the Shopify ecosystem, Salesforce apps, YouTube channels, or even TikTok creators, Libby says.