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

Muselya direct-to-consumer telemedicine platform, has secured over $360 million in non-dilutive 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 didn’t want 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 been cash-flow positive for years, he said. Jia didn’t want to dilute his ownership in the company by selling a piece of it to a VC. They often approached him about a potential round and he kept turning them down, he said.

But unlike traditional venture capital, CVF wasn’t trying to take an equity stake, nor was it offering an interest-bearing loan. Instead, CVF’s alternative financing is similar to a miniature revenue-sharing arrangement: Companies with predictable revenue streams borrow capital and then repay the capital along with a fixed, limited percentage of the revenue it generates from the use of General Catalyst’s capital.

Although Jia was initially skeptical, he quickly realized that CVF’s terms were more favorable than a typical bank loan and much less expensive than a equity round.

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

While Musely is growing its revenue by an average of 50% 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 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 burn, it’s huge.”

Funding from CVF solves this problem, providing Musely with a capital chest to support the growth of its customers. The funding will support sales, marketing and other customer acquisition efforts.

Musely joins a CVF portfolio that includes Grammarly, Lemonade and Ro. The fund maintains its own separate limited partners, and the capital it invests was not included in General Catalyst’s latest $8 billion fundraising.

Unlike many of its peers, Musely has been extremely capital efficient. After raising $20 million from DCM and other investors in 2014, the company hasn’t raised a single dollar of equity since then, according to Jia. Musely allows patients to access prescription products through asynchronous consultations with board-certified dermatologists and OB-GYNs.