Musely takes $360 million from General Catalyst without surrendering equity

Musely, a direct-to-consumer telemedicine platform, has secured more than $360 million in non-dilutive capital from General Catalyst’s Customer Value Fund (CVF).

The company specializes in combination treatments for skin, hair and menopause care. Jack Jia, co-founder and CEO of Musely, told TechCrunch that when CVF investors approached him last year, he wasn’t looking to raise capital.

That’s because Musely, which was founded in 2014 as a wellness community before pivoting to prescription skin care in 2019, has had positive cash flow for years, he said. Jia did not want to reduce his ownership in the company by selling part of it to venture capital firms. He said they contacted him frequently about a possible tour and he kept turning them down.

But unlike traditional venture capital, CVF was not looking to take an equity stake, nor did it provide a loan that carried interest rate charges. Alternatively, alternative financing for CVF It’s like a small revenue sharing agreement: Companies with predictable revenue streams borrow capital, then pay back the money with a fixed, set percentage of the revenue they generate from using the General Catalyst Fund.

Although Jia was skeptical at first, he soon realized that the terms of the CVF were more favorable than a standard bank loan and much less expensive than a dilutive equity round.

“When I designed the mathematical model, I found this quite convincing,” he said.

While Musely has been growing its revenue by 50% on average year over year and has served more than 1.2 million patients, acquiring new customers for DTC brands like Musely can be very expensive, Jia explained. “When you become a billion-dollar company in revenue, you need another billion to grow to the next billion,” he said. “That’s why most DTC companies, if you look at their capital burn, it’s huge.”

CVF financing solves this problem, providing Musely with a capital fund to support its clients’ growth. The funding will support sales, marketing and other customer acquisition efforts.

Musely joins a CVF portfolio that includes Grammarly, Lemonade, and Ro. The fund retains its blue-chip limited partners, and the capital it invests in General Catalyst’s latest $8 billion fundraising campaign is not included.

Unlike many of his peers, Mosley was remarkably capital efficient. After raising $20 million from DCM and other investors in 2014, the company has not raised a single dollar of capital since then, according to Jia. Musely allows patients to access prescription products through asynchronous consultations with board-certified dermatologists and obstetrician-gynecologists.