Slush is the most important tech event in Europe for startups and investors, and this year’s event did not disappoint. Given what we’ve come to expect from the Slush organizers, it’s no surprise that production and execution were near flawless. But what caught us by surprise was seeing for the first time in two years just how much more impactful in-person events are. We had more and deeper conversations with entrepreneurs and investors, which relayed how much the industry has matured in recent years.
For example, founders no longer see venture capital as the only way to finance growth. Many are aware of the broader set of financing options, including revenue-based financing. This savviness is underlined by the industry’s explosive growth. The European tech sector has seen more than $100 billion in investments in 2021, bringing the total ecosystem value to $3 trillion ($1 trillion of which was realized in the last 8 months).
To build on this momentum, we hosted a panel for a small group of entrepreneurs on the second day of Slush, where we discussed strategic approaches to cash management for recurring revenue businesses. We spoke with Calqulate founder Niko Laine and Sastrify founder Sven Lackinger on how entrepreneurs can optimize their approach across phases of cash management. Here’s what they said.
Incoming cash: increase optionality
Fundraising is easy when you’re in a good position, but it can be very challenging when your raise is reactive to suboptimal business dynamics. The trick is to incorporate flexible finance solutions early to preemptively manage your cash position. Having more options allows founders to protect against the risk of needing to raise without the right metrics.
“A lot of companies come to us because they are in between the venture ecosystem and traditional debt financing, and struggle to find scalable solutions to fit their needs. That is where alternative financing can come in as a more flexible and immediate solution.” – Henrik Grim
Existing cash: optimize pricing and billing cycles
For most SaaS companies, pricing and billing cycle decisions form the cornerstone of financial strategy. But despite their importance, they are underutilized as levers to optimize cash flow. For example, monthly payments may reduce customer friction and improve conversion, but annual payments can provide free cash flow to fund additional customer acquisition. Calqulate directly tackles the challenges startups face in seeing how pricing and billing factors impact the bottom line, and helps illustrate the effect of potential changes.
“Companies should use metrics like CAC (Customer Acquisition Cost), CLV (Customer Lifetime Value) and ACV (Annual Contract Value) to forecast cash flow, predict runway, and position themselves best for fundraising.” – Niko Laine
Outgoing cash: negotiate with suppliers
When it comes to managing suppliers, founders often see SaaS subscription costs as fixed. Understanding market rates for these supplier services and negotiating alongside other buyers can reduce costs and improve your cash position. Tools like Sastrify can reduce the burden of benchmarking and procurement for SaaS subscriptions by making the process easy, transparent and effective.
“As you grow, it becomes more important to understand your numbers beyond ARR (Annual Recurring Revenue). Cost optimization is crucial to ensure that the money you bring in works as hard as possible to fuel expansion.” – Sven Lackinger
The increasingly sophisticated European tech ecosystem comes with greater available resources, competition, and tools to navigate the journey. When a third of startups fail due to cash flow issues, it’s imperative for founders to tap into resources that enable them to manage their finances in a smarter way. We at Capchase are thrilled to be deepening our presence in Europe alongside companies like Sastrify and Calqulate, so that we can better support founders on their journey to rapid yet deliberate growth.