My fiance works at a company called Ampla, which provides non-dilutive financing to CPG brands, which are historically underbanked but are also not well suited to the venture model. It got me thinking about why companies raise money in the first place, and why one brand might choose an Ampla with an extremely high interest rate over an equity investment (assuming it can find one).

It sounds really simple, but the only reason to raise money ever is to bridge the gap of the timing of cash flows. You need financing if the only way you get a cash inflow is to first have a cash outflow. Said another way, you have to pay people in order to get paid. Most businesses are this way, and the best businesses are able to flip this at some point.

When I think of business that artfully flip this dynamic, oddly the first that comes to mind is investment banks, at least on the advisory side of the bank. Investment banks have built years of relationships and access to information and leverage both to act as an intermediary. They take a small piece of a transaction, and only afterward use that income to pay the employees that contribute to the lionshare of the cost of arranging the transaction.

Many “middle-men” businesses enjoy this same dynamic. In the tech world, we see this most often with at scale marketplace businesses. The best ones are those where this dynamic is strongest. AirBnB is a good example, where hosts are paid for the service that AirBnB provides only after AirBnB’s customers have paid the company. Uber is an example where this dynamic isn’t as strong, where for years the company provided large driver incentives to keep them driving, in excess of the fees paid by consumers.

Ecommerce seems to benefit from this dynamic and is probably one of the leading factors in Amazon’s success as the pioneer of eCommerce, particulary around Amazon marketplace. For your average eCommerce brand, a company can receive orders and payment only to manufacture and ship the product afterward. Of course, this dynamic unfortunately flips back once an eCommerce brand expands into retail and then is at the whim of retailer inventory planning, requiring the brand to hold enough inventory to absorb retailer ordering variance. This is when a company like Ampla becomes more attractive.

Editor Note: Well, Ampla went under only a few months after writing this. It turns out those CPG brands are underbanked for a reason.