The New Frontier of Startup Capital:
Alternative Funding Models
An insight-driven look at how Revenue-Based Financing and Corporate Venture Capital are reshaping the investment landscape in emerging markets.
The 2024 Funding Landscape: A Turning Point
As traditional venture capital grows more cautious, emerging markets are seeing a dramatic shift in investment trends. This divergence highlights a new reality where founders must be more resourceful than ever.
Startup Investment Change (2024 vs 2023)
Understanding the Models
Two key alternatives are gaining prominence, each offering a distinct value proposition for startups ready to scale.
Revenue-Based Financing (RBF)
A non-dilutive loan repaid via a fixed percentage of future sales. It’s capital for growth without giving up equity.
Key Features:- Retain 100% ownership and control.
- Repayments flex with your cash flow.
- No board seats or personal guarantees required.
- Faster access to capital than traditional VC.
Corporate Venture Capital (CVC)
Strategic equity investment from established corporations seeking financial returns and innovation synergies.
Key Features:- Access to corporate resources (distribution, tech).
- Strong market validation and credibility.
- Potential for a strategic partnership or acquisition.
- Gain valuable industry expertise and mentorship.
Key Players in the Field
Across emerging markets, a new ecosystem of specialized funders is deploying significant capital and reshaping startup growth trajectories.
a55
~$90M
Deployed to over 1,000 companies in Brazil and Mexico.
Merchant Capital
~$371M
Funded 25,000 businesses in South Africa since 2012.
Wayra (Telefónica)
€233M+
Invested in over 1,100 startups worldwide.
Jenfi
$500K
Offers non-dilutive loans up to $500K for digital businesses.
Sony Ventures
$10M
Deployed a dedicated fund, making its first investment in a SA gaming startup.
Efficient Capital Labs
$11M
Raised to finance SaaS companies across India and Southeast Asia.
Regional Deep Dive
Each region presents a unique landscape of opportunities and hurdles for alternative funding. Explore the specifics below.
Applications & Opportunities
RBF: Gaining traction to fill the “missing middle” financing gap for SMEs that are too large for microloans but not yet ready for VC. A vital tool for e-commerce and fintech.
CVC: Nascent but has huge untapped potential, especially in South Africa. Local banks and telcos are beginning to establish venture arms to tap into the continent’s tech boom.
Challenges
RBF: Macroeconomic instability, currency volatility, and difficulty in accessing reliable, real-time revenue data for underwriting can pose significant risks for lenders.
CVC: A limited number of local corporate funds, complex regulatory hurdles (e.g., competition law), and a less mature exit environment (fewer IPOs/acquisitions) can deter investment.
Applications & Opportunities
RBF: The ecosystem is robustly embracing RBF, particularly for SaaS and fintech startups, as a way to extend runway and weather the slowdown in traditional VC funding.
CVC: Growing rapidly, with a reported 90% of large corporations planning or running CVC initiatives. Banks (BBVA) and telcos (Telefónica) are very active.
Challenges
RBF: High inflation in some countries and currency fluctuations can erode returns and complicate revenue-sharing agreements if not managed carefully.
CVC: Complex tax regimes, political instability, and legal uncertainties around equity exits can create friction and deter long-term corporate commitments.
Applications & Opportunities
RBF: Actively used by cross-border digital and SaaS businesses. Providers are innovating with dual-currency loans to mitigate foreign exchange risk for both founders and funders.
CVC: Highly developed, especially in Singapore and Indonesia. Regional “super-apps” like Grab and Gojek act as major strategic investors, building their ecosystems.
Challenges
RBF: The diversity of the region is a challenge. Operating cross-border requires navigating a complex web of different currencies, legal systems, and financial regulations.
CVC: Varying levels of regulatory maturity and rules around foreign ownership in key sectors can complicate deals and portfolio management across the region.
Recommendations for a Thriving Ecosystem
Building a robust alternative funding landscape requires coordinated action from all key stakeholders.
For Founders
- Explore a mix of funding options to find the best fit.
- If you have revenue, consider RBF to preserve ownership.
- With CVCs, clarify strategic goals upfront.
- Build relationships early through pilot projects.
For Incubators
- Educate startups on the pros and cons of each model.
- Facilitate corporate-startup matchmaking events.
- Invite RBF lenders to demo days and workshops.
- Provide guidance on term sheets and best practices.
For Corporates
- Develop a clear CVC strategy aligned with business goals.
- Set up dedicated, agile teams that can move fast.
- Offer more than just capital—provide strategic value.
- Collaborate with local VCs to share risk and deal flow.
For Policymakers
- Craft enabling legal frameworks for new funding models.
- Offer tax incentives for corporate investments in startups.
- Support fintech infrastructure like data portability.
- Invest in capacity-building and financial literacy.