An accelerator is a hybrid of service provider and investment fund …
Operating the program obviously incurs expenses, including: paying for meeting space, signage, catering, videographers, flyers, etc. is the major expense.
In addition, there are expenses related to:
- Growing visibility of the “Fledge” brand
- Recruiting the applicants
- Drafting and updating the contracts
- Accounting for all the RBF investments
Plus all the typical overhead of running both a service-oriented business, and an investment fund.
All of this work fully employs the time of the Managing Director year-round, plus when the 10-week program is in session, employs a Program Manager to assist in coordination of the participants and mentors.
To make Fledge a fiscally sustainable company, the key is to keep the total expenses less than or equal to the total cash stipends.
With that rule in place, each $1 in investment incurs no more than $1 in expenses. With a 2x multiple on that $2 via the revenue-based financing, that is potentially $2 in profit. Given some of the RBF will not be returned, there is a 50% margin for failure to achieve break-even, not counting the value of the “residual” equity.
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