![]() In addition, to be able to raise venture debt - which often comes with covenant coverage and warrant - a company needs to have raised some equity funding to back it. That ability to upsize the loan and the fact that a company can get its money in as little as two days are prime benefits of Capchase compared to many other forms of funding, such as venture debt, Fernandez said. The amount a company can borrow also can go up, as its recurring revenue increases, he added. Capchase may pay out $108,000 for the total $120,000 ARR in return, which would cover the discount, Fernandez said. An example would be a company with $10,000 in monthly recurring revenue. If approved, Capchase will loan the company their ARR minus the discount, meaning the company can pay off the loan in 12 months with its monthly recurring revenue. That discount can be anywhere between 15 percent and 30 percent, while Capchase’s discount is typically 5 percent to 11 percent, fluctuating based on risk. “And right now capital is cheap and it will only keep getting cheaper.”įernandez got the idea for Capchase by reimagining the discount SaaS companies often give customers to get an entire contract’s value upfront. “I think people are looking at different ways to get capital without diluting themselves,” said Nathan Latka, founder of Founderpath. ![]() That issue leads many to look at funding or venture debt.īut what if those companies could receive their ARR number - or some part of it - in one lump sum with no dilution? While SaaS has grown, its subscription-based business models can lead to cash flow issues for new and smaller entries to the market. alone in the last five years, according to Crunchbase data. SaaS companies have exploded over the last decade or so - with nearly 2,400 being founded in the U.S. Others include Austin, Texas-based Founderpath and Los Angeles-based Pipe. “These companies have assets in their deferred revenue.” ARR as a lump sumĬapchase is one of a handful of platforms looking to lend based on a company’s monthly, quarterly or annual recurring revenue. “You are just seeing more companies look for more ways of funding now,” said Miguel Fernandez, co founder and CEO of Cambridge, Massachusetts-based Capchase. While venture debt, shred earning agreements (SEALs), simple agreement for future equity (SAFEs), and revenue-based financing all have proliferated in popularity to some degree or another, some companies now entering the market are looking at SaaS numbers and recurring revenue as a way to help startups with cash flow. While large venture funding rounds often grab the headlines, more tools continue to spring up to offer founders alternatives to what can be costly dilutive equity rounds. ![]()
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