Financing SaaS

It have been only two years since New York-headquartered Capchase launched in May 2020–now, the growth-financing company has raised $1BN of capital to lend to thousands of SaaS (software-as-a-service) start-ups and tech-enabled companies across the U.S. and Europe. 

The new round, led by specialty finance firm i80 Group and an undisclosed international banking group, comes just four months after the company raised an $80MM Series B and about a year after it closed a $280MM round of debt and equity, based on PrivCo's data. The syndicate was joined by a committed roster of VC investors, including QED Investors, Bling Capital, SciFi VC, 01 Advisors, and Caffeinated Capital. 
 

This new traction is during a year of market volatility when VC equity has fallen by volumes, has seen some significant down rounds, and valuations have been slashed. “There is a huge demand for alternative funding. This demand is only increasing as well-run SaaS start-ups look for capital to continue to grow during these uncertain economic conditions,” says Henrik grim, MD of Capchase.
 

Solving for SaaS
With over 2,400 SaaS companies founded in the U.S. alone in the last five years, their subscription-based business models often lead to cash flow problems for the smaller and new entrants to the market – which is what makes this non-dilutive capital provider an attractive alternative to funding or venture debt. 

Capchase extends an immediate line of credit to companies to access future capital with the loan amount based on the company’s annual recurring revenue discounted, in most cases, 5% - 10%. Companies that work with Capchase are therefore able to receive their ARR number fast (in as little as two days) and secure funding in one lump sum that doesn’t dilute ownership. Moreover, Capchase Analytics gives them access to a personalized dashboard with up-to-date financial metrics where users can “better understand their business growth trends, forecast the future, make profitable decisions, and feel confident in timing their raises.” says Capchase CEO Miguel Fernandez.

Unlike typical venture debt requirements, Capchase funding doesn't require SaaS companies to have raised equity funding to back the Capchase loan, and this option doesn’t have covenants or warrant coverage. Capchase’s model strikes us as an appealing, quicker, more flexible, and independent solution.

Capchase is one of a handful of platforms lending capital based on recurring revenue. Competitors like San Francisco-based Clearco and Austin, Texas-based Founderpath have also had funding rounds over the last couple of years.