Part 3 of 3: Implementation & Resources
In Part 1, we examined the broken venture capital model. In Part 2, we introduced the VC Risk Swap solution. Now, in Part 3, we cover real-world implementation: legal and tax complexity, due diligence requirements, timeline expectations, why this matters in 2025, and complete information about the Safer Wealth Team behind this innovative framework.
Key Takeaways: Part 3
Implementation takes 60-90 days including legal documentation, support documentation, insurance structure, and final agreement
Founders need qualified legal counsel, licensed tax professionals for CRA guidance, and accounting advisors
Investors should conduct thorough due diligence covering company fundamentals and structure-specific considerations
The venture capital model hasn’t evolved for 50+ years while company needs have changed dramatically
$3 trillion in dry powder seeks deployment but lacks structures for companies outside traditional VC criteria
Series Navigation
Part 1: Venture Capital is Dangerous
Part 2: Venture Capital is Safe
Part 3: Venture Capital is Working
Real-World Implementation
For Founders: What To Expect
Professional expertise required:
Qualified legal counsel for corporate structure design and regulatory compliance
Licensed tax professionals with CRA expertise for Income Tax Act compliance
Accounting advisors for proper financial statement treatment under ASPE or IFRS
Insurance specialists for policy valuation and underwriting
For Investors: Due Diligence Requirements
Company fundamentals:
Financial statements and projections analyzing path to profitability
Intellectual property ownership and protection verification
Competitive positioning and market opportunity assessment
Management team experience and capability evaluation
Business model validation including CAC, LTV, and unit economics
Why This Matters in 2025
The Traditional VC Model Was Built For A Different Era
The venture capital model made sense in 1970. Limited partners gave money to general partners who deployed it into high-risk, high-reward bets. The fund structure with its J-curve, management fees, and carried interest worked perfectly when companies could reach scale in 3-5 years with modest capital and IPO at $10-20M revenue.
The Landscape Changed Dramatically
Companies stay private longer. The path from seed to exit stretched from 5 years to 10-15 years. Companies that would have IPO’d at $20M revenue in 1990 now stay private until $1 billion and easy access to late-stage private capital; market dynamics drove this shift.
Capital requirements exploded. Reaching profitability now requires 5-10x more capital. Building a SaaS company to profitability used to require $2-5M. Now it routinely requires $20-50M due to increased competition, higher customer acquisition costs, and product polish expectations.
Viable companies don’t always fit the traditional VC model. Thousands of companies could build $50M-$200M revenue businesses over 10 years but don’t fit VC requirements for billion-dollar outcomes in 7 years. These companies deserve capital but can’t access it through traditional VC.
Exit markets narrowed. IPO markets contracted while M&A concentrated among tech giants. VC-backed IPOs dropped from 269 in 1999 to 100-150 recently. M&A is dominated by Google, Apple, Microsoft, Amazon, and Meta.
The Capital Surplus Seeking Deployment
Ironically, while company funding needs increased and timelines extended, there’s more private capital than ever:
Wealthy individuals seeking alternative investments beyond 6-8% public market returns
Family offices managing generational wealth seeking diversification
Corporate venture arms investing for strategic insights
Sovereign wealth funds seeking yield
All searching for private company growth with reasonable risk profiles
Total dry powder (committed but undeployed capital) in private equity and venture capital exceeds $3 trillion globally.
The Innovation Gap
The result is massive mismatch:
Great companies can’t get capital on reasonable terms. A company building toward $100M revenue over 10 years is phenomenal for founders and investors. But it doesn’t fit VC math, so it can’t raise capital.
Investors can’t deploy without insane risks. Wealthy individuals and family offices want startup exposure but can’t stomach 90% failure rates. Capital sits in public markets earning 6-8% instead of funding innovation.
The venture capital industry funds a tiny sliver of deserving companies. VCs correctly point out they fund innovation and take risks. But they only fund 0.1% of companies seeking capital, only those fitting their specific model.
Alternative funding structures remain niche or poorly understood. Revenue-based financing, venture debt, and other alternatives serve specific niches but don’t solve the broader problem.
The VC Risk Swap recognizes we need better tools, structures built for how companies actually grow in 2025, not 1975.
The Bottom Line
When founders are building for 2025 but investors use 1970s capital structures, something must give. The VC Risk Swap isn’t replacing venture capital for companies that fit that model. If you’re swinging for $1B+ valuation in 7-10 years, go raise from Sequoia or Andreessen Horowitz.
But if you’re building a real business needing sustained capital while maintaining control, if you’re an investor wanting startup exposure without 90% failure rates and zero downside protection, there’s now another option.
The VC Risk Swap solves: valuation warfare, equity dilution anxiety, runway instability, investor downside risk, reverse acqui-hire value destruction, and governance alignment challenges.
The companies that will only be 5x in 5 years need capital too, the VC Risk Swap is the solution.
About Safer Wealth
The VC Risk Swap framework was developed by Safer Wealth (saferwealth.com), a Canadian financial services firm specializing in alternative capital structures for private companies and sophisticated investors.
Philosophy: Innovation in financing structures should match innovation in technology. Alignment beats optimization. Complexity should serve clarity. Risk should be managed, not just accepted. Accessibility matters.
Do Your Own Research
Primary Sources: Canadian Tax & Regulatory:
Income Tax Act (Canada) - Sections 148(7), 56(2), 246(1), 245
Canada Revenue Agency Publications - IC 89-3, Mandatory Disclosure Rules
ASPE - Sections 3290, 3400
Industry Research:
Feld & Mendelson. Venture Deals. Wiley, 2019
Graham. Y Combinator Essays. 2005-2023
Kaplan & Strömberg. “Financial Contracting Theory.” Review of Economic Studies, 2003
Ecosystem Studies:
Startup Genome Report. 2023-2024
NVCA Yearbook Data. 2020-2024
PitchBook VC Valuations. 2024
Corporate Finance:
PwC Canada Tax Planning. 2023-2024
Alternative Financing:
Ibrahim. “Debt as Venture Capital.” 2010
Cumming. “Contracts and Exits.” 2008
Nanda & Rhodes-Kropf. “Financing Risk.” 2017
Connect
email: riskswap@saferwealth.com
Web: SaferWealth.com
Video: Rumble @SaferWealth
LinkedIn: LinkedIn @SaferWealth
Disclaimer
This information is for educational purposes only and does not constitute legal, tax, accounting, or investment advice. The VC Risk Swap involves complex legal and tax considerations that vary based on individual circumstances.
Professional consultation required: Consult qualified legal counsel for corporate structure and compliance, engage licensed tax professionals for CRA guidance and GAAR risk assessment, work with accounting advisors for proper financial statement treatment under ASPE or IFRS, obtain independent valuations, and conduct thorough due diligence.
Risk disclosure: Past performance and theoretical structures do not guarantee future results. All investments involve risk, including potential loss of capital. The VC Risk Swap may not be suitable for all investors or companies. Consult qualified professionals before making investment or financing decisions.
Regulatory compliance: This article does not constitute an offer to sell or solicitation to buy securities. Any securities offered must comply with applicable laws including National Instrument 45-106 and Mandatory Disclosure Rules effective June 22, 2023.
YBAWS! Your Business Ain’t Worth Sh#t is a reader-supported publication.
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Last Updated: January 2025
Copyright: © 2025 Safer Wealth. Educational use permitted with attribution.