Financial Capital

Financial capital, as opposed to real capital (land, machines, physical goods) is ethereal form of capital encoded as digits in electronic accounting systems - also known as money. This money is distributed and allocated according to centuries-old principles of resource allocation, typically resulting in large accumulation of wealth and a Gini Coefficient above 0.5. From Open Source Ecology's perspective, the opposite of Financial Capital can be defined. In particular, we are interested in startup funding. For startup funding, instead of financial capital, OSE prefers distributed capital in the form of Open Source Social Capital. Although social capital appears to refer to services, this capital produces the hardware capital (goods and materials) necessary for enterprise startup.

Cost of Capital - Venture vs Revenue Financing

• A typical company will give up about 50% ownership, and successful companies bring in about 15x their initial investment of about $10M [1]. This is not good capital efficiency.
• Typical funding rounds - Seed, Series A, B, C - [2]
• Revenue financing is where an investor takes a cut of your revenue, until a multiple of their invenstment is reached (the cap), but doesn't end up owning your business.
• For cost of capital - revenue financing [3] is more expensive than a commercial bank loan but less expensive than venture capital.