Most founders who are raising capital look first to traditional equity VCs. But should they? Or should they look to one of the new wave of revenue-based investors?

Revenue-based investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. RBI normally requires founders to pay back their investors with a fixed percentage of revenue until they have finished providing the investor with a fixed return on capital, which they agree upon in advance.

This guest post was written by David Teten, Venture Partner, HOF Capital. You can follow him at teten.com and @dteten. This is the 5th part of our series on Revenue-based investing VC that touches on:

• Revenue-based investing: A new option for founders who care about control
• Who are the major revenue-based investing VCs?
• Should your new VC fund use revenue-based investing?
• Why are revenue-based VCs investing in so many women and underrepresented founders?
• Should you raise equity venture capital or revenue-based investing VC?

From the founders’ point of view, the advantages of the RBI model are:

Most founders who are raising capital look first to traditional equity VCs. But should they? Or should they look to one of the new wave of revenue-based investors?