When you apply to a non-dilutive finance provider, what happens behind the scenes?

Caitlin Breeze
Caitlin Breeze
Director of Marketing
Posted on
November 8, 2022
min read
When you apply to a non-dilutive finance provider, what happens behind the scenes?

More and more founders are drawn to the idea of using non-dilutive capital to grow without making their runway shorter. SaaS companies use Capchase to access non-dilutive capital and get between 30-60% of their ARR to fund predictable activities like user acquisition and growth.

Many are used to VC the fundraising process. VCs want to hear about the big picture, your vision for your business’s future, your product and leadership team. But non-dilutive finance providers are mainly interested in one thing: your financials. We need to understand your last 12 months, and what the outlook for your company is over the next 12 - 24 months financially. The process is faster and far more frictionless than rounds of pitching.

But with a wide array of metrics and data sources that can tell your financial story, it’s helpful to know what your finance provider cares about. What SaaS metrics matter when you’re looking for non-dilutive funding? And how do they affect your application for funding?

At Capchase, we usually connect to three sources of data: banking, accounting, and revenue data. And then we reconstruct all of the derived metrics out of those three data sources.

So we look at LTV/CAC, at retention, at Rule of 40. We look at burn multiples. We look at all of the SaaS metrics that you can think of. And then we use those metrics to understand the performance of the company: not only today, but also in the future. If these metrics hold, what does that company look like in 6, 12, 24 months? And then we stress test the company. What happens if those metrics start shifting?

Three of the key areas we look at on a company’s financials are:

Spend on growth - and returns in ARR

We've seen thousands of companies. And the best companies - the fastest growing companies, and the ones that last the longest - are the ones that spend between 35 to 50% of their top line on growth. Because if they have their unit economics figured out, that spend - which is huge - actually returns many more dollars down the line in the form of ARR.

Retention metrics of over 100%

The best companies also have metrics that show they focus as much on retention as on growth. And actually, that their efforts focused on retention get larger and larger over time.
The top companies we see have a net retention of over a hundred percent. That's no surprise to anybody. You know, like SMBs are on 105%, and then enterprises up to 120, 140%, which is huge. Just imagine having a customer base and every year you grow 20-30% without signing up any new customers - that is the dream scenario.

Burn multiple

And then finally:  the companies that reacted the quickest in the last six or eight months in terms of adapting - which we primarily see in their burn multiples - are also doing much better now. You derive your burn multiple by dividing your burn by your ARR growth over a certain period of time.

Below one means that you're burning less than a dollar for every dollar of ARR that you add in a given period. And that is an amazing result. Even a burn multiple of two would still be a good performance: burning $2 for every unit of ARR that you add. But we've seen companies go from 1.6 to 1.1  burn rate and that has had a remarkable effect on their runway and on the efficiency of their growth.

As valuation multiples have decreased over the last six months, we have seen that the companies that are able to reduce their burn multiples have a lot more time to grow into a revenue figure. Not only that, but they can grow into a revenue figure at a lower valuation multiple, which means an up round for those companies. In any case, it really pays off to be much more diligent with the burn multiple, and where you spend your money.

The power of metrics and data insights

Understanding data is what powers our business at Capchase: we identify future successes and mitigate risks by forecasting data, and then reacting very quickly as the data or the situation changes.

As well as being the engine of our behind-the-scenes decision making, this level of insight also empowers the founders we work with to navigate the market and maximize their success with non-dilutive funding. To that end, we have created resources like the Pulse of SaaS data insight series, and the Capchase SaaS Benchmark Report, which examines key performance metrics for B2B SaaS companies and gives insights into the areas that indicate and predict success.

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