Musely raises $360M from General Catalyst without equity dilution

Musely, a direct-to-consumer telemedicine company, has obtained more than $360 million in non-dilutive funding from General Catalyst through its Customer Value Fund (CVF).

The company focuses on compounded treatments addressing skin conditions, hair care, and menopause-related needs. Co-founder and CEO Jack Jia said that when investors from CVF approached him last year, raising capital was not something he was actively considering.

Musely, originally launched in 2014 as a wellness-focused community before shifting to prescription skincare in 2019, has been operating with positive cash flow for several years, Jia explained. Because of that financial position, he was reluctant to dilute ownership by selling equity to venture capital firms, despite repeatedly receiving funding offers he declined.

The approach taken by CVF differed from traditional venture capital structures. Instead of acquiring equity or issuing a standard interest-bearing loan, the fund provides financing under a revenue-sharing model. Companies with consistent revenue streams receive capital and repay it at a fixed, capped percentage of revenue generated by the funded activities.

Jia noted that although he was initially cautious about the structure, he later found it more appealing than both bank financing and equity fundraising. “When I mathematically modelled it, I found this absolutely compelling,” he said.

Musely has been expanding rapidly, with revenue growing at an average rate of 50% year-over-year and more than 1.2 million patients served. However, Jia pointed out that customer acquisition costs for direct-to-consumer brands can be substantial. “When you become a billion-dollar revenue company, you need another billion to grow to the next billion,” he said, adding that many DTC businesses face significant capital burn as they scale.

The CVF investment is expected to support Musely’s expansion by funding sales, marketing, and customer acquisition initiatives, providing the company with additional financial resources to sustain its growth.

Musely now joins other companies backed by the Customer Value Fund, including Grammarly, Lemonade, and Ro. The fund operates with its own set of limited partners, and its capital pool was not part of General Catalyst’s most recent $8 billion fundraising.

Compared to many startups in the sector, Musely has maintained a notably efficient capital strategy. After raising $20 million from DCM Ventures and other investors in 2014, the company has not taken on additional equity financing. Its platform enables patients to access prescription treatments through asynchronous consultations with board-certified dermatologists and OB-GYN specialists.