Sales incubators offer alternative to venture capital | Pham Capital

London: Founders of fast-growing early-stage businesses are being offered an alternative to pure venture capital funding from ?sales incubators? ? companies that offer to sell and market their products in return for an equity stake, rather than offering cash and advice.

The Sandpit, a London-based venture, is now providing a ready-made sales operation to the small companies it invests in, with the aim of increasing their revenues.

It started trading last year and has so far made one investment in Edinburgh-based artificial intelligence software consultancy SoDash.

For a 25 per cent stake in SoDash, The Sandpit has given the company ?125,000 (Dh718,603) in cash and a commercial team that has already generated an extra ?120,000 of annual sales revenue.

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This type of practical help is often what early-stage ventures need more than money, says Simon Campbell, The Sandpit?s founder.

Similar working

Bringing a venture capitalist on to the board could have been distracting for SoDash?s founders, Campbell claimed.

?They would have had to stop being coders and become business managers, then build a sales force themselves,? he argued. Berlin-based German Media Pool has a similar business model to The Sandpit, generating advertising campaigns for promising early-stage ventures in return for an equity stake.

?We are like a VC fund, but instead of investing cash we invest media,? founder Nico Waesche said, adding that he was happy to invest alongside VC firms because his company?s work complemented their role as advisers.

Flip side

But not all venture capitalists think these models for investment are such a good idea. Saul Klein, a partner at Index Ventures, a VC firm that invests in early stage companies as well as more mature businesses, expressed concern that a fund such as The Sandpit could replace the founder of a company as chief salesperson.

?In the earlier stages of your company there is no one going to be better at selling your product than the founder,? Klein said.

Article source: http://gulfnews.com/business/investment/sales-incubators-offer-alternative-to-venture-capital-1.993934

Source: http://phamcapital.com/?p=521

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