In Revenue Capital’s New Strategy in Sourcing Revenue

“The Venture world needs to change. They must embrace a true value-add mentality rather than treating founders and their companies like commodities,” says Justin Gray. This is the mission Gray sees for In Revenue Capital, to which he brought extensive experience in helping launch it this year as its co-founder and managing partner. 

“I’m an operator to the core,” Gray says. “I love everything that is early-stage startups. I also love the variance and excitement that comes with venture investing. So, armed with perspectives that spanned both worlds, I wanted to create something that would solve for the acute pains of startup founders and their teams — and would also allow me to live in both the worlds I loved. Hence, In Revenue’s operator-immersive model was born, where we provide both venture capital and operator expertise.”

Trends in Venture Capital

Active for the past five years in startup investing, Gray has been both an angel investor and a limited partner in three venture capital firms. “My own evolution as an investor coincided with the rise of the ‘operator capital’ movement where firms like GTM Fund and Stage 2 Capital are bringing a lot of attention to that model,” Gray says, explaining that the operator capital trend recognizes that founders and their startups need more than capital alone to succeed in today’s unstable and rapidly changing environments. 

Gray believes there’s tremendous power in creating large networks of limited partners that not only invest but are available to function as advisors to portfolio companies to guide their growth. In practice however, “as the number of limited partners in a firm grows and its fund sizes grow to dozens and even hundreds of investments, the act of connecting the right limited partners and the right portfolio companies at the right time becomes a very difficult alchemy,” he says. 

Gray also had experience with high-growth organizations that had definitively graduated from startup territory and were scaling into 8-, 10- or even 11-figure businesses. These companies, which had seemingly hit their stride, were struggling the same way that startups struggle as “once-in-a-generation events like COVID, virtual workforce transformation, and now economic recession were resetting the board on a what seemed like daily cadence,” Gray notes.

“So, because of these different but complementary perspectives, a key learning for me emerged — and that was the fact that the typical outlets and resources by which you would expect founders and leaders to turn to for advice in navigating these high challenging situations, were failing them,” Gray shares.

In Revenue Takes a Different Approach

“Our diligence process has to not only evaluate the viability of the investment but also the risk as well as the fit for us to literally stepping into the business as an operator,” says Gray. This goes far beyond product market fit and business model evaluation. “Our rabbit hole goes deep into culture, ideal customer makeup and, at the most fundamental, we consider, ‘Can we use our specific skillset to amplify the organization so that one plus one ultimately equals ten?’” If all the answers come back positive, the hard work would then begin.

“At the end of the day, we only know how to do the hard stuff,” says Gray. Noting that all the partners within In Revenue are self-made successes, having built their companies from nothing and taking them to a place where they were truly best-in-class, he says, “The experience derived from that work is exactly what today’s startups are clamoring for.”

A New Landscape

“When we first brough In Revenue to bear, we squarely thought we were taking on the VC establishment,” Gray relates. He and his partners were surprised, then, to find many partners at traditional venture firms actually did have an appetite for improvement. “They wanted to bring more value,” he says, “but, for the average VC firm, that means bringing in outside talent — and that’s expensive.”

So, In Revenue has created its own niche in the venture world. “Rather than battling over term sheets, we’ve instead found ourselves partnering with much larger, more well-established firms to bring our value-add offering alongside their larger coffers,” Gray says. “It’s truly become a win-win, as we can participate in larger rounds that previously would have been out of our altitude and have the opportunity to add our GTM and operator expertise into companies that would have otherwise been out of reach. Inversely, seed-stage founders and their teams can secure the capital they need along with the expertise and tactical help to truly thrive.”