Musely secures $360 million from General Catalyst without giving up equity

They had todirect-to-consumer telemedicine platform, has secured more than $360 million in non-net capital from General Catalyst’s Customer Value Fund (CVF).

The company specializes in complex treatments for skin, hair and menopause care. Musely co-founder and CEO Jack Jia 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 health community before becoming a prescription skin care company in 2019, said it’s been cash-flow positive for years. Jia did not want to reduce his ownership in the company by selling part of it to VCs. They often approached him about a potential round, and he continually turned them down, he said.

But unlike traditional venture capital, CVF did not intend to buy an equity stake, nor did it offer a loan that would carry interest-rate payments. Instead, CVF’s alternative financing is like a small revenue-sharing deal: companies with predictable revenue streams borrow capital and then pay back the funds, along with a fixed, capped interest rate on the use of the General Catalyst fund.

Although Jia was skeptical at first, he quickly realized that CVF terms were more favorable than a standard bank loan and cheaper than an equity round.

“When I modeled it mathematically, I found it absolutely fascinating,” he said.

While Musely grows its annual revenue by an average of 50% and serves more than 1.2 million patients, it can be very expensive for DTC brands like Musely to acquire new customers, Jia explained. “When you’re a billion-dollar revenue company, you need another billion to get to the next billion,” he said. “That’s why most DTC companies, if you look at the capital, it’s huge.”

CVF’s funding solves this problem, providing Musely with a capital war chest to support customer growth. Funding will support sales, marketing and other customer acquisition efforts.

Musely joins the incoming CVF portfolio GrammaticallyLemonade and Ro. The fund maintains its own separate limited partners, and its invested capital was not included in General Catalyst’s latest report. $8 billion in fundraising.

Unlike many of its peers, Musely has been remarkably capital efficient. According to Jia, after raising $20 million from DCM and other investors in 2014, the company has not raised a single dollar of capital since then. Musely allows patients to obtain prescription products through asynchronous consultations with board-certified dermatologists and OB-GYNs.