Mobtown Labs

This post made me think of something. Has anyone every tried investing in a company like a line of credit. i.e. USV chooses to invest in my company at the $1MM level and that $1MM works like a credit line for the company at whatever valuation rate they are at. So let’s say my company decides to draw $100k out of that $1MM approved VCLCE (Venture Captial Line of Credit Equity) at $1 per share and then 3 months later decides to pull another $600k of it at $1.50 per share when they need more of it.

My thought is as startups are more risky these days because there are fewer exit strategies available this would benefit the startup because they only would take what they need and since the VC would be on their board they can advise and vote for or against each ‘draw’ against the VCLCE and it would protect the VC from diving in on companies and tying up money as they see companies going south, they can turn off the spigot and re-allocate funds and essentially manage their portfolio companies in a more fluid fashion.

Anyway, I’m no finance guy and it’s probably a half baked thought, but I was just curious if you came across it and what people thought the pro’s/con’s would be.