The Two Tales of An Innovative Venture Deal
A Mission-Driven Fund-Returner, With or Without An Exit.
Innovators are nerds. So capital innovators are capital nerds.
Capital nerds are not founders.
And founders are the customer.
And there lies the danger in capital innovation.
This is what made me so refreshed to complete an innovative deal with Isaac Squires and so excited to share it with this newsletter. It is not often that a founder comes to the investor with capital innovation in mind. Building a company is hard and capital raising is exhausting. It is fair for founders to not want to waste an innovation point on their capital stack. In fact, I think it is investors’ responsibility to innovate in a way that meets founders where they’re at.
Lucky for us, before we ever met, Isaac had already thought deeply about his company, including capital. Having raised and sold a company already, he couldn’t ignore his conclusions for this go around.
This provided a unique occasion to nerd out with the customer - one thoughtful founder. With that, I’ll let Isaac set the stage in his own words:
The Founder Tale
The Journey to Aligning Long-Term Goals with Venture Investment
By Isaac Squires
When we started Human Program, our mission was to build a free, self-paced alternative to classroom education—one that could offer world-class education to students everywhere in the world. It was an ambitious vision, especially given the well-known challenges of ed-tech: difficult monetization, long sales cycles with schools, and, in this case, a core audience in underserved regions where even ad revenue is minimal.
But as experienced entrepreneurs and technologists, we knew what we were signing up for and why it was worth it. We’d worked on projects with clearer business models but less meaningful impact, and we were ready to take on a harder problem with real-world stakes. Confident in our ability to build, we committed fully: bootstrapping from day one, taking no salaries for the first two years, and sustaining ourselves through consulting work and personal capital. It was a demanding path, but one that shaped our culture—scrappy, mission-driven, and unwilling to compromise on access or impact.
Why Venture Investment?
As a seasoned founder, I initially envisioned Human Program as a self-sustaining entity. I wasn’t keen on raising venture capital. Traditional VC models often prioritize liquidity events like acquisitions or IPOs within a decade—timelines that can conflict with a mission-driven, long-term vision like ours. Having experienced this pressure in previous ventures, I wanted to build Human Program with sustainable growth at its core, prioritizing profitability and team agility.
But by 2023, the landscape shifted. The release of GPT-3.5 created an unprecedented acceleration in generative AI, reshaping the ed-tech space. It became clear that to scale quickly and stay competitive, we needed external resources. Our app, Primer, saw rapid user adoption with advertising costs as low as $0.06 per install. Early experiments with a subscription model began showing promise. These signals indicated it was time to amplify our efforts.
Additionally, on a personal level, my wife was ready to step back from her executive role, and I needed to start paying myself a salary. This compounded the urgency to explore funding options.
Finding the Right Partner
Enter Greater Colorado Venture Fund (GCVF). When I met Cory Finney at West Slope Startup Week in Durango, I was struck by the alignment of our philosophies. GCVF’s focus on rural Colorado businesses—often bootstrapped and outside traditional VC pipelines—resonated deeply. Their willingness to experiment with innovative deal structures opened the door to a conversation about what a partnership could look like for Human Program.
After discussions with Cory and his partners, Jamie Finney and Marc Nager, we landed on a hybrid approach that incorporated a revenue share alongside preferred equity. This model solved a critical challenge for us: how to secure investment without compromising our long-term vision or creating undue pressure for a quick exit.
The Revenue Share Structure
The investment structure we arrived at is a reflection of the flexibility and alignment we were fortunate to find with GCVF. Here’s how it works:
Preferred Equity: GCVF’s $500,000 investment bought them approximately 7.1% of Human Program’s equity at a $7 million post-money valuation. The round also included a 10% employee option pool and other standard rights.
Revenue Share: Investors receive 5% of our quarterly gross cash revenues (net of app store fees) after a three-year holiday period. This revenue share is split pro-rata among investors and provides a path to returns independent of an exit event.
Dissolution Option: If investors remain involved for seven years without a liquidity event, they can vote to be bought out, ensuring alignment over the long haul.
This structure offered GCVF and other investors the potential for returns tied to our revenue growth, even in the absence of a traditional exit. For Human Program, it preserved the flexibility to pursue our vision sustainably and the potential to operate the business indefinitely.
Reflections on the Partnership
Choosing to take on venture investment was not a decision I made lightly. But with GCVF, we found partners who understood our unique challenges and were willing to think creatively about solutions. This partnership has provided us with not only capital but also confidence and a safety net as we navigate this next stage of growth.
With the ability to scale operations, accelerate user acquisition, and enhance our product offering, Human Program is poised to make a meaningful impact on education worldwide. And we’re doing it on our terms, with the support of aligned investors who share our belief in building businesses sustainably.
The Investor Tale
Venture Capital with or Without the Exit
-Jamie Finney
The first thing you should know is that we had never done a deal like this before.
We had completed a few redeemable equity investments before and made a stink about capital innovation. This was enough to pique Isaac’s interest and trust that we’d be willing to hear his needs for non-traditional funding as opposed to simply passing like most investors would.
The design specs we heard from Isaac were:
His ambition is for a world-changing homerun
He does not want to be forced to exit
This round will likely get us to profitability
The company is already capital efficient and GPT 3.5 was going to amplify that
Margins are high and likely to remain high
From our perspective, the implications on our structuring were as follows:
We need to structure in liquidity…
…without ruling out a later round
…without ruling out an exit
…without capping our upside
“I want to be a fund returner for you guys.”
On one of our calls, Isaac asked me what would make this a win for our fund. Isaac started this company to fundamentally affect education globally. Our answer revealed our support for that mission. It also was the truth about the venture fund we raised. I told him we wanted to see a fund-returner.
I asked him how we would measure success for our partnership. He responded the same. Like us, he didn’t see any place for a false tradeoff between impact and returns.
We then walked through the napkin math of a comparable business at unicorn scale. Our revenue share at its scale was surprisingly close to the size of our fund. This is about as scientific as “upside” calculus gets in venture, and it was surprising to see how similar that held up with our structure.
Could we have implemented more radical incentives? Yes. We could have tied our returns to education outcomes. We could create a trust that holds a golden share and votes for the children. However, we’re a generalist venture fund that exists to prove there are high-ambition startups being founded everywhere. Isaac aligned with that. And we align with his global education ambitions.
Docs
At this point, we were ready for deal docs.
This is a daunting moment when you’re doing new deal structuring. Lawyers can run up impressive tabs using only template docs.
After a lot of research and helpful collaboration from Isaac and his lawyer, we agreed that our changes were simple enough that they could be dropped into traditional NVCA docs. This gave us comfort that we’d keep all the rights and protections of any other investment. Moreover, should we need to raise another round, our changes would be obvious to show to a later firm. In reality, if that round comes along, we don’t want to limit our options to capital-innovation-friendly investors. We’re ready to default back to the vanilla venture capital path if it is what is best for the company and our fund. Critically, we trust Isaac’s VC skepticism enough to be sure we will remain aligned with him and his mission.
So what did we add to the docs?
The revenue share is a preferred dividend.
After three years, the dividend is default declared quarterly unless the board vetoes.
The board is Isaac, us, and an independent whom we all respect.
We participate in common dividends too.
As a testament to Isaac’s thoroughness, he felt this was important to ensure if he used dividends as compensation for his team, it would never be at odds with his investors.
All in, this back and forth took us a couple of weeks. It was immensely helpful that Isaac understood the nuances of our agreement and was willing to work with his lawyer to draft them. Our legal reviewed once we had all agreed on a draft. This dynamic was best-case for headaches and cost. All in, this was certainly one of our most expensive deals, but we accomplished way more than similarly priced rounds with more menial back and forths. The total drafting added to the NVCA docs was less than a page.
Implications
Seedstrapping from First Principles
What I love about having taken over a year to get to this writeup is that we were sketching out “seedstrapping” before it was cool.
Not to pat ourselves on the back, but this came before “seedstrapping” was cool. Seed funds hadn’t realized it was cool to be capital efficient yet. The new AI-enabled tech stack was creating capital efficient companies, but the capital stack had not yet responded. Even Indie VC, the instigator capital efficient venture, was still iterating on how to be pro-unicorn, AI, and efficiency all at once. This is what makes being the “rural fund” an advantage. We innovate because founders and fundamentals tell us to. It is nice to have the venture-hype machine working for us for once.
I digress.
Autonomy to Affect Change
I have had countless conversations with impact investors who see companies compromise on their original mission to raise capital. This is Isaac’s fundamental reasoning for wanting to avoid exit-lock-in at the outset.
We can’t say we have avoided that risk forever, but we at least did not make that exit promise in our round. To the extent margins remain and growth continues, we can retain mission autonomy with profit for funding. It has been done and will only happen more and more.
Truly No Exit?
Should an acquirer be able to amplify the company’s impact, we’re open to that. None of us will decline the equity cashout that would entail either. That is why we are normal preferred equity holders and why our ownership is not redeemable.
What if we do need to raise another round?
It is not hard to imagine that we need more funding given the global scale. It could be a Series A. It could be a Series A at Series D stage. We should be ready.
Most likely, we will have to forego our revenue share if this happens. For us, we’re a venture fund that is used to the venture stack playing out. Easy enough. Maybe we’ve even made some money beforehand. Most importantly, we trust Isaac’s values and practicality to weigh this decision productively with the board.
A Parallel Capital Path
I’d be remiss not to mention an obvious best-case later round opportunity.
We are doing our revenue share math based on fund-returning scale. In venture, as rounds continue that math slowly regresses towards PE multiples and timelines (e.g. 3x in 2 years vs. 100x in 10). Why can’t a growth investor also invest on our structure to reach their return targets?
A typical equity round presumes the dilution to existing shareholders is worth the upside bought by the additional capital. Owning 4% of a $100M business is better than 5% of a $50m business (hence why ownership targets are often silly). We can do the same math with our revenue share. We would gladly take 4% of revenues if the final revenue number could grow more than our 20% revenue dilution. This is the same math law firms do when they consider doling out partner shares to their star lawyers and some PE firms use profit sharing rights already. Why can’t there be a parallel capital stack to venture that works off of these cashflow incentives?
Are there downsides? Yes. Are there downsides to the existing venture capital stack? Yes. So why not make both an option?
Conclusion
All in all, we hope Human Program can pave the way for capital-efficient, mission-first companies. Both trends are on the rise and worth amplifying.
We took a minimalist approach to the innovation but think we solved the most immediate, egregious shortcomings of existing venture capital, while still providing venture capital. Success for Isaac is measured in the number of human lives changed by access to education. Success for us is measured in dollars. Most investors are judged by similar metrics as us, so we hope this helps illuminate a path which allows everyone to win.
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