Musely raises $360M from General Catalyst, no equity given
▼ Summary
– Musely secured over $360 million in non-dilutive capital from General Catalyst’s Customer Value Fund (CVF), which uses a revenue-share agreement instead of equity or traditional loans.
– Founded in 2014 as a wellness community, Musely pivoted to prescription skincare in 2019 and has been cash flow positive for years, serving over 1.2 million patients.
– CEO Jack Jia initially declined VC funding to avoid diluting his ownership, but accepted CVF’s terms after modeling them as more favorable than bank loans or equity rounds.
– The capital will fund customer acquisition efforts, addressing the high cost of growing a direct-to-consumer brand with 50% year-over-year revenue growth.
– Musely has raised no equity capital since a $20 million round in 2014, making it unusually capital-efficient compared to peers.
Musely, a direct-to-consumer telemedicine platform focused on compounded treatments for skin, hair, and menopause care, has secured more than $360 million in non-dilutive capital from General Catalyst’s Customer Value Fund (CVF). The deal is notable because it involves no equity stake and no traditional interest-bearing loan.
Company co-founder and CEO Jack Jia told TechCrunch that when CVF investors first approached him last year, he wasn’t actively seeking funding. Musely, originally launched in 2014 as a wellness community before pivoting to prescription skincare in 2019, has been cash flow positive for years. Jia had repeatedly turned down venture capital offers because he did not want to dilute his ownership. But CVF’s alternative financing structure caught his attention.
Unlike standard VC investments, CVF provides capital through a revenue-share-like agreement. Companies with predictable revenue streams borrow funds and repay them with a fixed, capped percentage of the revenue generated from using CVF’s capital. There are no interest charges and no equity given up. Jia admitted he was skeptical at first, but after running the numbers, he found the terms far more attractive than a bank loan or a dilutive equity round.
“When I mathematically modeled it, I found this absolutely compelling,” he said.
Musely has been growing revenue at an average of 50% year-over-year and has served over 1.2 million patients. However, acquiring new customers for direct-to-consumer brands can be expensive. Jia explained that as companies scale toward billion-dollar revenue levels, they often need to reinvest heavily to sustain growth. “When you become a billion-dollar revenue company, you need another billion in order to grow to the next billion,” he said. “That’s why most of the DTC companies, if you look at the capital burn, it is huge.”
The CVF funding solves that problem by providing a capital war chest to fuel sales, marketing, and other customer acquisition efforts. Musely joins a CVF portfolio that includes Grammarly, Lemonade, and Ro. The fund operates with its own distinct limited partners, and its capital was not part of General Catalyst’s last $8 billion fundraise.
Musely has been remarkably capital-efficient compared to many peers. After raising $20 million from DCM and other investors in 2014, the company has not taken a single dollar of equity capital since, according to Jia. Patients access prescription products through asynchronous consultations with board-certified dermatologists and OB-GYNs, a model that has kept costs low while driving steady growth.
(Source: TechCrunch)
