Musely secured $360 million from General Catalyst without giving up its stake.

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

We are a company specializing in complex treatments for skin, hair, and menopause care. Musely co-founder and CEO Jack Jia told TechCrunch that he wasn’t considering raising capital when CVF investors approached him last year.

That’s because Musely, which was founded as a wellness community in 2014, had been cash flow positive for several years before pivoting to prescription skincare in 2019, he said. Jia did not want to reduce his ownership of the company by selling part of it to VCs. They frequently approached him about potential rounds, and he consistently turned them down, he said.

However, unlike traditional venture capital, CVFs did not seek to acquire equity nor did they offer loans at interest rates. Instead, alternative financing for CVFs is similar to a small revenue-sharing arrangement. Companies with predictable revenue streams borrow capital and then repay the funds with a fixed, capped percentage of returns generated through the use of General Catalyst’s funds.

Jia was skeptical at first, but soon realized that the terms of a CVF were more favorable than a standard bank loan and the costs were much lower than a dilutive equity round.

“When I modeled it mathematically, I found this to be absolutely compelling,” he said.

Although Musely is averaging 50% revenue growth each year and serves more than 1.2 million patients, acquiring new customers for a DTC brand like Musely can be very expensive, Jia explained. “Once you become a billion-dollar revenue company, you need another billion to grow to the next billion,” he said. “This is why most DTC companies are so massive when you look at their capital burn.”

CVF’s funding addresses this issue, providing Musely with a capital war chest to support customer growth. The funds will support sales, marketing and other customer acquisition efforts.

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

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