Ask a group of startup founders about fundraising and you will usually hear two stories. One founder says venture capital is rocket fuel: raise big, hire fast, win the market, and try not to look directly at the burn rate. Another founder says venture capital is a treadmill wearing a Patagonia vest: once you step on, the speed keeps increasing until your company either becomes huge or becomes a very educational LinkedIn post.
That is why alternative fundraising structures like Indie.vc, revenue-based financing, shared earnings agreements, non-dilutive debt, and founder-friendly accelerators have become so interesting. They promise something traditional venture capital often does not: room to build a strong, profitable, durable company without needing a billion-dollar outcome to make the math work.
So, what does Jason Lemkin think about alternative fund raising structures like Indie VC? His answer is short, practical, and very Jason Lemkin: smaller funds can experiment with different investment structures because their return math allows it. But as funds approach roughly $100 million or more, the economics tend to pull them back toward the standard venture capital model. In plain English: alternative structures are not silly. They are just hard to scale inside a large VC fund that needs unicorns to survive.
The short version of Lemkin’s view
Jason Lemkin’s core idea is not that Indie.vc-style structures are bad. It is that fund size determines behavior. A small fund can win by backing companies that sell for $30 million, $50 million, or $100 million. A huge fund cannot usually build a great return profile on those outcomes, because the check sizes, ownership targets, and limited partner expectations are built for far larger exits.
This is the heart of his view on alternative startup funding. A small regional fund, niche fund, solo GP, or specialized SaaS fund may be able to use creative terms: redeemable equity, revenue share, profit share, founder buybacks, or flexible equity. But a large Sand Hill Road-style venture fund is generally designed around power-law outcomes. It needs companies that can become unicorns, decacorns, or bigger. That is not because big VCs are allergic to charming profitable companies. It is because their spreadsheet is.
Why fund size changes everything
To understand Lemkin’s opinion, founders need to understand venture capital math. A $20 million fund can return the fund with one $100 million exit if it owns enough of the company. A $500 million fund barely notices that same exit unless its ownership is unusually large. This is why two investors can look at the same startup and both be rational while reaching totally different conclusions.
For a micro fund, a capital-efficient SaaS company that reaches $10 million in annual recurring revenue, grows steadily, and exits for $80 million can be a beautiful result. For a large VC fund, that same outcome may be a shrug wearing a finance hoodie. The founder may become wealthy. Employees may do well. Customers may be happy. The product may live on. But the large fund may not move the needle.
Lemkin’s point is that alternative fundraising structures fit best when the investor’s required outcome matches the company’s likely path. If the fund needs unicorns, it will behave like a unicorn hunter. If the fund can make money from smaller, profitable exits, it can behave more flexibly.
What Indie.vc was trying to solve
Indie.vc became well known because it challenged the “grow at all costs or go home” startup script. The model was aimed at founders building sustainable, often profitable businesses that might not want to hyperscale. Earlier Indie.vc structures included mechanisms that allowed founders to redeem or buy back investor ownership through company performance rather than being forced toward a traditional acquisition, IPO, or follow-on VC round.
That idea was refreshing. It told founders: “You do not have to cosplay as the next Uber if you are building the next excellent software company with real customers and real margins.” For many SaaS founders, that sounded less like rebellion and more like common sense with better branding.
But Indie.vc also showed the hard part. Alternative venture structures can be attractive to founders and still be difficult for limited partners. LPs often categorize investments into familiar buckets: venture, private equity, credit, growth equity, real estate, and so on. A structure that blends equity-like upside with debt-like redemption can be elegant for a founder but confusing for a pension fund, endowment, or institutional investor trying to compare fund performance.
Why Lemkin’s view aged well
Lemkin’s 2016 comment looks even more relevant today. The startup market has swung from the free-money boom of 2021 to a more selective funding environment where AI companies absorb enormous amounts of investor attention while many traditional SaaS companies have to prove efficiency, retention, and durability.
In that world, founders are asking a better question: “What type of capital actually fits my business?” Not every company should raise venture capital. Not every company should avoid it, either. The right answer depends on market size, growth rate, gross margin, customer acquisition cost, net revenue retention, founder ambition, and the kind of exit that would count as a win.
Lemkin has written often that venture capital can be essential for building many top cloud companies, but he has also acknowledged that there is more than one way to build a large and meaningful software company. He has pointed to examples of companies that used little or no traditional VC for long stretches. The nuance matters: he is not anti-VC, and he is not anti-bootstrap. He is pro-math.
Alternative fundraising structures: the main categories
1. Redeemable equity
Redeemable equity gives an investor ownership but creates a path for the company or founder to buy back some or all of that ownership under defined conditions. This was one of the ideas associated with Indie.vc. It is attractive because it gives founders a path to independence. The challenge is complexity: lawyers, follow-on investors, and LPs need to understand exactly how the instrument behaves in different scenarios.
2. Revenue-based financing
Revenue-based financing gives a company capital in exchange for a percentage of future revenue until a repayment cap is reached. For SaaS companies with predictable recurring revenue, this can be a useful way to finance sales, marketing, hiring, or product development without selling more equity. The catch is that repayments come from cash flow, so founders must be careful not to starve a growing company of oxygen.
3. Shared earnings agreements
Shared earnings agreements are built for companies that may become profitable and distribute earnings rather than raise round after round. Investors participate in founder earnings or company profits up to a cap or according to a formula. These structures are designed to align with calm, profitable companies. The downside is that they are less standard than SAFEs or priced equity rounds, which can create extra friction when new investors enter later.
4. Founder-friendly equity accelerators
Programs like TinySeed use equity but design their model around independent SaaS founders. The key difference is philosophical. Instead of pushing every company toward a billion-dollar exit, these programs can make sense for businesses that reach seven or eight figures in revenue and remain profitable, sell modestly, or grow steadily over time.
5. Non-dilutive debt
Non-dilutive debt can help recurring-revenue companies finance growth without selling ownership. Lemkin has written favorably about using debt carefully in SaaS when it funds accretive hires or activities. The important word is “carefully.” Debt is not magic money. It is money with a calendar and a memory.
Where Lemkin would likely say Indie VC works best
Based on his public writing, Lemkin would likely see Indie.vc-style structures as best suited for companies that are capital efficient, have real revenue, can become profitable, and do not require massive amounts of capital to win. These companies may have strong niches, loyal customers, high gross margins, and founders who care more about control and durability than press releases about “oversubscribed” rounds.
They may also be companies where a $50 million or $100 million exit is a spectacular outcome. Traditional VC can accidentally make those outcomes feel disappointing because the investor needs something much larger. That is where alternative funding can better align incentives. If the founder would be thrilled with a $40 million sale and the investor can also win at that level, everyone can stop pretending the company must become Salesforce before lunch.
Where traditional VC still makes sense
Traditional venture capital still makes sense when the market is huge, the product can scale fast, competition is intense, and speed matters. If a startup needs to hire aggressively, build enterprise sales, expand globally, or capture a winner-take-most market, standard VC may be the right tool.
Lemkin’s own investing style reflects this. He focuses on B2B and SaaS companies with strong early traction, often looking for founders who can build very large outcomes. He has also emphasized customer traction, high conviction, and the importance of getting to meaningful revenue. That is classic SaaS venture thinking: not spray-and-pray hype, but still venture-scale ambition.
The key is not whether VC is “good” or “bad.” The key is whether VC is matched to the company. A bulldozer is great if you are building a highway. It is less great if you are planting tomatoes.
Pros of alternative fundraising for founders
Alternative funding can preserve ownership, reduce pressure to raise the next round, and allow founders to optimize for profitability. It can also make investors happy with smaller exits, which matters more than many founders realize. When investor and founder definitions of success are aligned, board meetings become less like hostage negotiations with slides.
Another advantage is optionality. A founder can build toward profitability, sell when it makes sense, or raise a traditional round later if growth accelerates. Some alternative structures are designed to convert into equity if the company raises venture capital later. That flexibility can be powerful.
Cons of alternative fundraising for founders
The biggest disadvantage is complexity. Standard SAFEs and priced rounds are familiar. Alternative instruments require explanation. Future investors may pause. Lawyers may bill. Accountants may sigh deeply. Nobody likes a sighing accountant.
Another issue is cash drag. Revenue share and profit share can pull money out of the business when the founder wants to reinvest. That is why some modern alternatives avoid mandatory revenue payments and instead use dividends, shared earnings, or standard equity with founder-friendly expectations.
Finally, alternative capital may not provide enough fuel. If your market is exploding and competitors are raising $50 million rounds, a small flexible check may feel principled right up until the other team hires your dream VP of Sales and sponsors every conference booth from here to Mars.
The founder’s decision framework
Before choosing Indie.vc-style funding, founders should ask five questions. First, what exit size would make everyone happy? Second, how much capital does the company really need to reach escape velocity? Third, will future investors understand the structure? Fourth, will payments or redemptions reduce growth capital at the wrong time? Fifth, does the investor’s fund model match the founder’s desired path?
This last question is the most Lemkin-like. Do not just evaluate the term sheet. Evaluate the investor’s business model. A fund that needs decacorns will push differently from a fund that can win with profitable $50 million outcomes. Neither is morally superior. But one may be a much better fit.
Specific example: a SaaS company at $1 million ARR
Imagine a bootstrapped B2B SaaS company at $1 million ARR, growing 60% year over year, with 85% gross margins and happy customers. The founder could raise a small traditional seed round, take revenue-based financing, join a founder-friendly accelerator, or keep bootstrapping.
If the market is narrow but profitable, alternative funding might be ideal. A $300,000 to $1 million check could help the company hire two people, improve onboarding, and grow without forcing a unicorn narrative. If the market is huge and the company has a chance to become a category leader, traditional VC might be better, even if it means dilution and pressure.
Lemkin’s answer would likely be: match the capital to the opportunity. Do not use venture capital because it is glamorous. Do not use alternative funding because it feels morally pure. Use the money that fits the business you are actually building.
Experience-based lessons from founders considering Indie VC-style funding
In practical founder conversations, the Indie.vc question often appears after someone has already felt the awkwardness of traditional fundraising. A founder has revenue, customers, and a product people use, but the VC meeting still turns into a debate about whether the market is “venture scale.” That phrase can be useful, but it can also feel like being rejected by a nightclub because your shoes are profitable.
The first experience many founders share is relief. Alternative structures give them permission to admit that they want to build a strong company, not necessarily a unicorn. That psychological shift matters. When a founder stops pretending every slide must point to a $10 billion total addressable market, the business plan often gets sharper. Pricing becomes more realistic. Hiring becomes more disciplined. Customer success becomes less of a department and more of a survival strategy.
The second experience is surprise at how much education is required. Founders may love the structure, but their lawyer may not have seen it before. A potential angel may ask whether it is debt or equity. A future VC may wonder how it converts. Even when the terms are fair, unfamiliarity creates drag. This is one reason standard instruments like SAFEs became popular: they reduce negotiation friction. Alternative fundraising has to work twice as hard because it must sell both the company and the structure.
The third experience is a healthier relationship with growth. Founders using Indie.vc-style thinking often become more careful about spending. They ask whether a hire will produce cash, whether paid acquisition really works, and whether annual prepayments can finance expansion. These are not small questions. They are the difference between a company and a campfire with a Stripe account.
The fourth experience is that optionality feels wonderful until competitors raise more money. A founder may enjoy control and capital efficiency, then watch a rival announce a $25 million Series A. That moment tests conviction. Sometimes the right answer is to stay disciplined. Sometimes it is to raise traditional VC before the market window closes. Alternative funding is not a vow of poverty. It is a tool.
The fifth experience is that investor alignment changes the emotional tone of the company. If investors can win from profits, dividends, buybacks, or modest exits, founders can make strategic decisions without constantly asking, “Will this look big enough for the next round?” That does not remove pressure. Building a company is still hard. Customers still churn. Payroll still arrives with the punctuality of a villain. But the pressure becomes more connected to business fundamentals and less connected to fundraising theater.
The final lesson is that Lemkin’s framework helps founders avoid identity traps. You are not “better” because you bootstrap. You are not “more ambitious” because you raise VC. You are not “less serious” because you use revenue-based financing. The best founders choose the financing structure that matches their market, product, growth rate, and personal goals. That is the grown-up version of fundraising. Less mythology, more math.
Conclusion
Jason Lemkin’s view on alternative fund raising structures like Indie VC is best understood as a lesson in fund economics. Small funds can experiment because smaller outcomes can still generate strong returns. Large VC funds usually converge on standard venture capital because their LPs expect returns that require unicorns or decacorns.
For founders, the takeaway is liberating: there is no single correct way to fund a startup. Indie.vc, revenue-based financing, shared earnings agreements, TinySeed-style equity, non-dilutive debt, SAFEs, and traditional priced rounds all have a place. The smart move is to choose the capital that matches the company’s real path, not the one that sounds best on a podcast.
Alternative funding is not a rebellion against venture capital. It is a reminder that not every great business needs the same financial engine. Some companies need rocket fuel. Some need a reliable hybrid. Some just need enough gas to reach profitability without selling the steering wheel.
