Bolstr “is a seamless marketplace” online that connects firms marketing tangible goods, like food and beverages, to a network of about 1,000 accredited investors willing to loan money to stable companies for a low return multiple repayed through a flexible payment plan, said co-founder of Bolstr Charlie Tribbett.
Bolstr can help companies pre-approved by the website raise between $25,000 and $500,000 by collecting small loans from multiple investors, similar to how Kickstarter or CircleUp work, but unlike those sites where it can take several months for firms to meet their fundraising goals, the raise time on Bolstr is five days or fewer and can be done in as few as 24 hours, Tribbett said.
The site is able to help firms raise money so quickly because it has a network of investors who do not want to become part-owners, so the raise is purely financial and does not take personalities and partnerships into account.
The trade-off for the ability to maintain 100% ownership is the money raised on Bolstr must be paid back with a multiple determined by the website based on the company’s financials. However, the multiple is capped at a feasible level, Tribbett said.
In addition, he explained, the repayment plan is based on flexible revenue sharing, meaning companies pay back investors based on a percentage of profits.
“We size all the monthly payments back to investors that are proportional to the revenue,” which means during successful months a firm would pay back more money, but during slow months they would pay less, Tribbett said. This scheme is particularly well suited for firms selling seasonal items, such as icecream, because they would not need to risk eating into their working capital to pay back investors during the winter months when sales are slower.
As a result, the timeframe for paying back investors vary, with successful firms being able to repay investors more quickly, Tribbett said.
He also explained that the total amount a company is able to borrow through the website is capped on the amount which it can feasibly repay. Firms with tighter profit margins, therefore, will not be able to borrow as much capital as those with higher margins.
What Bolstr looks for in firms
Not all companies will qualify for funding on Bolstr, Tribbett acknowledged. He explained that in order to protect investors from firms that could go bankrupt and be unable to repay them, Bolstr only allows on its platform firms that meet specific historical revenue levels, sell tangible products, can be profitable within six months of the loan, make at least $200,000 in sales annually and have at least two years of experience in the market.
Using these criteria, all the companies that have gained access to Bolstr’s marketplace were funded, Tribbett said.
He noted that the only company not to meet its fundraising goal was one that did not meet these criteria, which were established in response to that case.
Who Bolstr helps & what it gets in return
The platform lends itself well to food and beverage companies, but so far most firms have been in the food service space, such as food trucks, distilleries and retail outlets or coffee shops. However, several consumer packaged goods firms also have been funded, including JuiceRx, which sells fresh pressed juices, and Vintage Confections, which markets lollipops.
In exchange for connecting these firms with lenders, Bolstr charges a fixed fee of $1,500 up front, but unlike other crowdfunding sites, it does not take a cut of the funds raised.
Tribbett explained that the site charges a low, flat fee instead of a commission because “we started this with the mission to lower the barriers to capital,” and is mainly interested in “the satisfaction that we are helping really interesting businesses grow.”