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LaunchCapital LLC has a new venture financing model. The Cambridge-based VC firm launched last year is now writing loans much like a venture bank such as Square 1 Bank or Silicon Valley Bank, in hopes they will be able to go beyond the kinds of businesses VCs traditionally favor.
The debt investments are designed for cases where investing partners believe in an entrepreneur but don’t think the business model has capacity for exponential growth, said managing director Elon Boms. In those cases, it will invest up to $150,000 in straight debt, with an equity stake between two percent and 10 percent.
So far, the firm has made two investments using the new strategy. One is Garment Valet, an online delivery dry-cleaning service plotting an expansion to New York. Garment Valet is a dba of Boston-based Husky Express Corp.
The other is Young Sportscasters of America Inc., a program that charges tuition for a program that teaches kids communication skills by letting them produce television programming.
Both companies have taken $150,000 from LaunchCapital.
LaunchCapital has an evergreen fund backed by a single limited partner — a family office whose identity the firm has not disclosed. Its first-round investments average about $125,000, the firm reports.
The profile it is looking for in its new investment model is smaller businesses that have revenue at launch. “We want to fund great people who we believe have the capacity to make a go of any business in the market,” Boms said. “It doesn’t necessarily have to be the next Google.”
Young Sportscasters CEO and founder Jimmy Young said he will use the LaunchCapital funds to expand the startup’s search-engine marketing efforts, rebuild its website, and improve the company’s Natick studio. The debt financing also ensures the company has a pool of working capital, he said.
“If it wasn’t for LaunchCapital we wouldn’t be in business,” said Young, a long-time Boston-area TV sportscaster who founded Young Sportscasters last spring.
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