Revenue-based financing: the funding option for Founders who don't want VC
Not every startup should be a unicorn. Tractor Ventures' Jodie Imam explains revenue-based financing - funding for the tractors, not the rockets.
The startup world runs on one default assumption: raise venture capital, chase the unicorn, land on the moon. Jodie Imam has a different observation from a decade inside the machine. "Sometimes the rockets land on the moon and that's great when they do, but most of the time they blow up and that's ugly."
Jodie co-founded Occasional Butler (acquired by Airtasker) and now co-runs Tractor Ventures - and on Life After Launch she gave the clearest explanation you'll hear of the funding model built for everyone else: revenue-based financing.
Where the idea came from
Matt Allen spent years at AWS handing out cloud credits to scaling companies, watching the VC model chew Founders up from both ends: the ones who couldn't get funded, and the ones who did and then buckled under the control and growth pressure that came with the cheque. The inspiration for an alternative came partly from Indie.vc in the US - famous for the exploding unicorn on its homepage.
Tractor launched in 2020, from locked-down living rooms in Melbourne. And in a detail that says everything about how this ecosystem compounds: Jodie wrote "I really want to work with Matt Allen one day" in her journal, and he messaged her on WhatsApp the same day.
How it actually works
In its original form, dead simple: you take a loan and repay it as a percentage of your revenue. Good month, you pay more; slow month, you pay less. No equity given up, no board seat, no unicorn-or-bust expectation. The model has since evolved, but the principle holds: the funding flexes with the business instead of demanding the business flex around the funding.
Behind the scenes, Tractor now runs a securitised warehouse with institutional debt providers - senior, mezzanine and junior lenders with an equity slice covering first loss - blended into the capital they lend Founders.
The first two loans, to Teamgage and Creatively Squared, are the origin story: Matt's own money, lent to Founders he knew. The equity raise that followed came largely from Founders Matt had backed over his previous decade of angel investing - "I invested in you, now it's your turn to invest in me."
Who it's for
Profitable or revenue-generating companies that want to grow sustainably: the tractors. Not a consolation prize for companies that "couldn't raise" - a deliberate choice for Founders who looked at the rocket and decided they'd rather keep their equity, their control and their pace.
If you're pre-revenue and swinging for a winner-take-all market, VC still fits. If you're generating revenue and want growth capital without selling the company to get it, this is the option most Australian Founders still don't know exists.
Revenue-based financing is one door out of the VC default. The other is letting your customers become your shareholders - equity crowdfunding, which we cover with Birchal's Kirstin Hunter.