Five years ago, Bart Goodwin and Ed Mello came across a young, but established, tech company in Dallas. The owners were looking for capital so they could expand their business. Unable to find it locally, they moved to the Silicon Valley. “It opened our eyes that there was a funding gap for companies in that space,” Goodwin says. “It’s one thing to give up a lot of equity if you’re starting your business. It’s another thing to have proven yourself.”

He and Mello co-founded Cypress Growth Capital in 2010 to help respond to that need. Drawing from the pharmaceutical and movie industries, the duo decided to take a royalty financing approach. Instead of taking an equity stake, Cypress provides growth capital to emerging and expanding businesses for a percentage of the firms’ future revenue. There are no fixed or minimum requirements. How much a company owes Cypress Growth Capital is dependent upon its monthly revenue. Once the agreed-upon cap is reached, the obligation is complete.

Mello believes this type of funding solves two problems he saw in North Texas—a lack of expansion capital and the drawbacks of traditional funding.

To get started, he and Godwin raised $30 million from investors. “They were really attracted to our form of financing, because they, too, thought that would solve the problem for them as the investors, as well as the companies that were receiving the capital,” Mello says.

So far, Cypress Growth Capital has placed about two-thirds of that first $30 million. It has invested in seven companies—five of which are based in North Texas.

It also took on a new partner: Vik Thapar, formerly with the North Texas Regional Center for Innovation and Commercialization.

James MacLean, president and CEO of Geoforce, a Cypress Growth recipient, says that he appreciates the firm’s investment approach—and that Goodwin and Mello know when to consult, and when to leave a company alone.

“We come at the world with an operating perspective and an empathy for the entrepreneur,” Mello says. Prior to launching Cypress, he worked at EDS and Computer Sciences Corp., then was part of a successful dot-com startup. Goodwin worked for Accenture and CSC.

“They’re not intrusive in our business,” MacLean says. “But they’re always there for bouncing off ideas.”