Retooling equity models

The Seats team at Thoroughbred Park in Lexington

Startups and longstanding businesses with capital needs typically face a choice between debt and equity, but a Lexington, KY-based fintech wants to offer companies a new way. Seats Capital, founded this year, offers a hybrid middle ground based on future revenue. The revenue-based financing could be ideal for business leaders who don’t qualify for—or simply don’t like—existing debt and equity models.

In a nutshell, Seats slices up the future potential revenue of a company and sells it in chunks to individual investors. The model lets business leaders focus on the business of the company and its near-term targets. Shorter time horizons and a simpler valuation model mean the system offers better and faster liquidity. It also avoids the challenge of constantly trying to quantify future valuation. For investors, it’s an opportunity to invest in a horizontal band of revenue instead of a vertical slice of a company. Investors can also make smaller bets, with investments of as little as $1,000.

Seats’ leadership team believes its system will assuage friction between entrepreneurs and investors and streamline revenue assessment. “We think of it in terms of probabilities,” CEO Shane Hadden said. “It’s a lot easier to value the probability of hitting a revenue target than to value a company.”

Seats has just learned that it will be part of this year’s Launch Blue, a non-equity seeking pre-seed accelerator program designed to nurture the most promising Kentucky founders.