February 8, 2022

How to put your financing on auto-pilot

Whether you're looking for funding from a bank, a venture capital provider, or non-dilutive financing, your financial health is critical. This is why automating your billing and your fundraising are critical for growth.
Capchase x Ordway

At our recent webinar Finance on Auto-Pilot, Jamie Maynard (Head of Enterprise Sales, Capchase) and Steve Keifer (Head of Marketing, Ordway) looked at how to automate finance operations so you can spend more time growing your business.

Watch the replay of the webinar, and read on to learn our key takeaways on the best ways to put financing on auto-pilot:

The difficulties for tech-centric recurring revenue companies

As a startup, you’re often working with a lean team who are multi-tasking with the best of them. The finance department looks at strategic elements  - forecasting, fundraising, building relationships with investors that are essential for growth. But they still need to handle those regular finance jobs like invoicing, bookkeeping, and reporting. 

And while you can’t automate all the financial operations in a business, Steve pointed out that “you can get to 90% or higher, which achieves the goal of freeing up the finance team to work more on the strategy.” 

You’d think automating the finance department would be easy, but for today’s modern recurring revenue and as-a-service businesses, there are many challenges that make automation more complex.

And when that happens? “It’s common for us to engage with customers that are growing really quickly and finding it’s taking one or more weeks at the end of every month just to get their bills out the door,” said Steve.

It turns out that while the ‘easy’ subscriptions and contracts can flow through billing in a highly automated fashion, more complex ones require a high degree of touch and end up outside the system completely. Steve knows that while complexity is part of the customer lifecycle, especially for fast-growing companies, robust automated systems like billing, CRM, product and rating engines can all accommodate those changes through the cycle so that at least 90% of contracts can be automated. Steve also suggests that empowering customers with a self-service portal can allow businesses to anticipate issues, allow customers to take control of their account, and only contact an individual in the business when other avenues have been worked through first.

How automated reporting can support growth

Another key area to automate is reporting. From KPIs to recurring revenue metrics, your finance team is creating reports for everyone from the executive leadership to investors or alternative financing platforms. As you grow, you need more reports, and your finance team gets bogged down for longer and longer.

And it’s not just about the time. Incorrect information can embarrass your CEO or cause a potential investor to think twice. While you can’t fully automate all potential reports, automating the 10-15 most common reports so the information “is just a few mouse clicks away” can have a powerful effect on your team as a whole. 

How alternative capital providers can support fast-growing startups

Whether you're looking for funding from a bank, a venture capital provider, or non-dilutive financing, your financial health is critical. And for recurring revenue businesses, future revenue will be the focus. Which is why revenue and billing data, underlying retention churn profile, and year-over-year growth are the key metrics that you’ll be asked about again and again. Keeping this kind of information easily available to download will allow you to push your fundraising forward without having it take over all your employees time.

Jamie pointed out that Capchase focuses on what the customer wants; “flexible capital you can draw down when you need it rather than a term sheet with specific rules.” 

Capchase finances through programmatic financing, which means giving the power back to founders and providing flexible capital that can be drawn down incrementally.

Automated reporting allows for speedy underwriting

Unlike banks and venture capital funds, Capchase can underwrite within 24 hours if they are able to sync data sources like banking, accounting, and billing data. The more these are automated, the faster underwriting can happen.

On average, Jamie says, Capchase provides from 30% to 60% of forward-looking annual recurring revenue (ARR) as an initial credit limit. As soon as ARR grows, the amount available increases. That incentivizes startups to re-invest in growth and allows for long-term partnerships. Automated reporting that lets startups continually update their alternative funder can take the reporting pressure off the team and allow that focus on growing to be front and center.

Jamie outlined a recent Capchase client’s story, where they required very heavy upfront spend to secure some big enterprise clients. Their business ran light on cash flow, but Capchase could see that they were a strong, growing business, and made a fast underwriting decision. This provided a credit line that allowed the business to immediately purchase what they needed and secure the clients. Which allowed for more growth, and less than a year later, they had 4xed their revenue.

The most important metrics to raise non-dilutive financing

Capchase focuses on the reports and data that prove growth. “Most of our clients are growing extremely fast or at a consistent pace,” Jamie said.  Capchase’s goal is to help growing businesses grow even faster. 

The important metrics to consider when applying for alternative funding include:

  • High-gross margins
  • Subscription-related performance metrics like LTV/CAC 
  • Retention churn profile
  • Revenue growth year-over-year
  • Retention year-over-year

Preparing these, and ideally automating these, will allow Capchase to make that speedy underwriting decision and provide the most flexibility for growing businesses. Learn more about Capchase's non-dilutive financing: Capchase.com/Grow

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Thanks to Ordway Labs for co-hosting this webinar with us. Check out their billing and revenue automation to learn more.