Last week I was talking with an entrepreneur about financing options and the current fundraising climate. One of the topics that came up was customer value financing, an idea I first explored a couple of years ago.

Customer value financing works like this: an investment company provides capital for sales and marketing efforts to acquire new customers. In exchange, the company receives a percentage of that new revenue until they are paid back, plus an equivalent of an interest rate. It is a form of non-dilutive financing that is not debt. Instead, it is essentially buying the right to a percentage of new revenue generated until a formula representing the desired return on investment is reached. Unlike traditional revenue financing, it is not a loan against the entire business and it does not claim existing revenue.

General Catalyst first popularized the idea a few years ago and has since raised and deployed capital using this model.

When I shared the concept with the entrepreneur, he had never heard of it. That prompted me to do some research, and what I found was surprising: the industry around customer value financing is basically nonexistent. I could be using the wrong terminology, and there may be capital providers offering similar structures under different names, but I was not able to find them.

That led me to ask why a market has not emerged to meet this need. After thinking about it, my conclusion is that startups already have access to traditional venture debt from banks and private credit providers like Conductor Capital. For entrepreneurs who qualify, venture debt works well. It is also much simpler to explain: “Here is a loan for X million dollars, and here are the terms.” You take the money and run your business.

By contrast, customer value financing, while arguably more aligned with growth-stage entrepreneurs’ goals, requires additional overhead. Defining, negotiating, auditing, and tracking incremental customer acquisition costs and resulting revenue adds a layer of complexity that does not necessarily change what entrepreneurs want to accomplish.

That said, seeing General Catalyst continue to announce new customers for its customer value financing program shows that at the high end of the market, with larger deal sizes, the model does fill a gap and attract demand.

Hopefully, over time, more providers will enter the space with variations of customer value financing. Entrepreneurs deserve more options and potentially better-aligned solutions for their growth. For now, there are still plenty of venture debt opportunities available, and entrepreneurs should evaluate them carefully in the context of their financing goals.