April 21, 2022

How to grow faster and more efficiently with programmatic financing

Running a high-growth startup is always a financial balancing act. Learn how programmatic financing fits into your financial toolkit in stabilizing your cash flows.

It’s a great time to be running a SaaS company — especially if your product reaches an enterprise audience. Chief information officers (CIOs) are recognizing the need to move more of their operations to cloud-based environments. There’s a general interest among executives to implement new technologies.

For this reason, many SaaS startups are finding themselves in a unique situation with untapped opportunities in their target markets. The challenge is that they cannot grow fast enough to meet the level of demand that’s out there.

Among Capchase customers, the biggest limitation is often access to working capital. Some startups in our ecosystem, regardless of whether they have taken venture capital (VC) funding, are hitting roadblocks around their burn rates and abilities to access capital. We’ve built our portfolio of financing solutions around this exact pain point for SaaS companies with monthly recurring revenue (MRR) business models.  

In this article, we explore the topic of using programmatic financing to grow your business faster and more efficiently.

What is programmatic financing?

The term programmatic financing is something we created at Capchase to describe our Grow product, which is our revenue based financing solution for high growth SaaS companies. Specifically, we work with SaaS companies with MRR business models to provide financing solutions. Our programmatic financing solution is non-dilutive, meaning that founders do not need to give up equity in order to use it.

Behind the scenes, Capchase Grow relies on a combination of specialized underwriters, customer experience expertise, and software to support the customers in our network. Our solution integrates with common banking software, which makes it easier to take flexible draws. With Capchase Grow, your funding capacity grows with your annual recurring revenue (ARR). As your company grows, so does your financing capacity. When you sync your data, Capchase calculates a Capscore, which determines your financing threshold.

Tools for growing faster and more efficiently

Capchase Grow is designed to improve a company’s capital efficiency. This metric is a ratio that communicates how much a company is spending for every dollar earned. For instance, a capital efficiency score of one means that you’re spending a dollar to generate a dollar. For companies pursuing the path of venture capital (VC), this metric is especially important for communicating with existing and potential investors.

Capchase Grow can help you extend your runway and improve your burn rate. It can also help with stabilizing your business operations — for instance, if you need to pay your team faster than you’re getting paid. Because Capchase Grow is a programmatic financing solution, you can draw funds when you need them, rather than needing to go out and fundraise. This flexibility is crucial for founders seeking more efficient ways to grow faster.

Let’s say, for instance, that your SaaS company is gaining interest in enterprise circles, but IT leaders are stopping contracts from being signed due to risk, compliance, and security issues. To respond, one simple adjustment that you could make is to make the required upgrades to your software. However, you need funds to make these upgrades.

Would the investment be worth it? Potentially. Will your business gain value from signing on enterprise customers? Will this decision enable your company to grow faster and more efficiently? The key is to answer these questions through the lens of capital efficiency. How much revenue can your business expect to generate for every dollar invested? 

Making sound, practical plans

Remember that you’re building your business in the real world — and that the real world is more complex than an Excel spreadsheet. Your customers aren’t just users. They’re human beings with thoughts and emotions. Your technology isn’t just an app. It’s a solution to someone else’s pain point.

The key to growing faster and more efficiently is to prioritize human drivers. At the end of the day, business is about people — employees, customers, and other stakeholders. With this context in mind, programmatic financing is about solving practical problems.

Capchase customers use our Grow product to advance a range of business milestones. Here are a few examples:

  • Reiz Tech, a fast-growing IT development company with around 200 employees, uses Capchase as a reliable source of working capital. The company uses revenue based financing, primarily, to sustain the pace of customer demand. You can read more about Reiz Tech’s experience with Capchase here.
  • The Looma Project has launched Loop, a wide network of smart tablets, with a unique algorithm called Story IQ, to capture the narrative of sustainable brands across various retail and grocery shops. The company’s business model depends on having access to quality gear, and with large commercial clients, costs can change dramatically from month to month. Capchase Grow makes it easier for the Looma Project to anticipate upfront expenses. With this model, the Looma Project leadership team can make fixed repayments over time.
  • Blackthorn is a company that builds Salesforce-native apps to make processing payments and managing events efficient and easy. Because the company is growing aggressively, there’s a need to flexibly access capital to stabilize costs and keep up with market demand. Capchase Grow is the solution that Blackthorn has used to increase their employee headcount.
  • Lawtrades, a marketplace for legal services, works with large companies that pay their bills on longer payment cycles. Capchase Grow helps to ensure that service providers are paid on time despite delays from clients.

If you’re looking to read more stories about how companies are using Capchase, you can browse through some of our customer stories — we’ve aimed to share a lot of detail for how our lending solution fits within a company’s financial operations platform. We strive to cover a wide range of business types and industries, so if you have a request for a story you’d like to see, let us know.

Learn how much you could extend your runway with Capchase through our runway calculator.

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Disclosure

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.