Upper90’s strategy of cutting checks with credit and equity may be more relevant than ever

When Billy Libby and Seamless co-founder Jason Finger launched Upper90 in 2018, they wanted to solve a problem: founders giving up too much equity too early because they needed money to build capital-intensive businesses. They thought if they wrote checks that combined debt and equity, founders could get the capital they needed while keeping more of their equity.

So far, they’ve seen demand. Over the past four years, that strategy helped the firm back startups including Amazon aggregators Thrasio and Elevate Brands, in addition to supply chain startups like Beacon. Now that equity is getting increasingly expensive as investors deploy more conservatively after last year’s fever. Libby told TechCrunch he thinks Upper90’s strategy will become more useful to founders than ever.

“One of the things I’m excited about is that this macro environment will spare nobody, so this will create a lot of opportunities for Upper90,” Libby said. “We really want to help founders with keeping more of their company. Our customer is the founder, and how many other credit firms have a tech founder as a founder?”

The firm looks to cut checks that are split into 90% senior-secured credit and 10% equity. The firm targets capital-heavy startups at the Series A stage in sectors including e-commerce, supply chain and financial services, among others. Libby said the credit offering is designed to be used for anything from inventory to acquisitions.

While raising both equity and credit in a round is nothing new, Libby said that one firm providing both types of capital can be really beneficial because every startup has a healthier side and a riskier side, and he feels this structure caters to both. Upper90 can help companies protect their bottom line like a debt provider while helping them plan for potential future upside, he said.

He added that because Upper90 largely works with early-stage companies that may not be as conducive to bank or venture debt — but could be a good recipient of government debt — the firm can help them avoid giving away too much equity early.

For context, $15 billion of venture debt was lent through more than 1,200 transactions in the first half of 2022, according to PitchBook data, which puts the year on track to potentially match — but most likely not surpass — 2021’s total of $33 billion.

Upper90 was the perfect type of backer for a company like Mundi, Martin Pustilnick, a co-founder and the CEO of the startup, said. Mundi underwrites SME companies in Mexico looking to export. Pustilnick said that he met Upper90 while Mundi was still forming and that the firm was fundamental in helping Mundi set up shop and secure additional financing as it grew.

“If you are a pure lender that doesn’t have any upside, you are preserving the principal,” Pustilnick said. “The equity is very different. You use it for research and development, but you won’t use it to lend out or buy businesses. By tying up both credit and equity, they give companies a partner that can help on both sides of the table.”

The firm is also in a solid position to take advantage of the current market conditions — it just held a first close on $180 million in its third fund, which is targeting $350 million. The firm raised this capital in just six weeks from a network of 300 LPs that is mainly composed of founders. Libby added that 60% of the firm’s deal flow comes from that network, too.

While this structure isn’t right for every company, as traditional equity gets harder to find, Upper90 thinks it is in a good position to thrive.

“We didn’t build Upper90 to be market timers, but it’s very relevant at this moment,” Libby said. “Equity is expensive and founders are still growing their business.”