Why Capchase’s dynamic funding structure is a founders greatest advantage

Henrik Grim
Henrik Grim
General Manager of Europe
Posted on
min read
Why Capchase’s dynamic funding structure is a founders greatest advantage

Traditional startup financing can be stressful and expensive

Traditional startup financing is based on the notion of raising capital infrequently, typically every 12-24 months.

Traditional funding vs Dynamic funding from Capchase

As a founder, this means:

  • You spend ~3-6 months to fundraise, then get a big cash injection
  • The financial plan you put together and showed investors during fundraising allows you to invest this capital into product development, growth, and hiring for the next 12-18 months.
  • After those 12-18 months, you will need to go out and raise capital again. However this time, given the expectations from your existing investors, you need to raise more money at a higher valuation. To be able to do this, you need to hit certain metrics & milestones.
  • Therefore, you typically feel good about the funding you collected for a few weeks/months, and then spend 12-18 months hoping you can hit your milestones, to go out and do the whole thing over again.
The cash position of a company using traditional startup financing

This can be a huge detriment to founders.

First of all, traditional financing is risky and stressful. What happens if you don’t reach targets & milestones? Will you be able to raise more money at all, and on what terms?

Secondly, the traditional route is expensive.

  • Equity: venture capital is the most expensive source of financing, as you sell shares of your company, that are expected to be worth several multiples of their current value
  • Debt: with big lump sum injections of debt, your fees will be significant, as you typically have large amounts outstanding over long periods of time. Add to this potential warrants and transaction costs.

Cue funding from Capchase

With Capchase’s dynamic funding structure you can inject just the right amount of capital that your business needs at exactly the right time, on a monthly or quarterly basis—the schedule that works best for you.

This is particularly suitable for companies with predictable returns on investments, as it allows for full control over future cash flow and cash position.

Here's an example of what this might look like:

  • A SaaS company invests $100-200k in sales & marketing activities every month
  • They know these investments pay back over a ~6-12 month period, so it’s only a temporary cash need that they have to make those investments
  • By drawing capital on a monthly basis, they can draw just as much capital as they need to cover the growth investments they are making, keeping their cash position stable
  • As their investments start yielding returns (i.e. increasing revenues), they use those returns to pay back Capchase
  • By drawing just as much as they need, they keep the fees associated with financing to a minimum, and therefore maximize the ROI on their investments
  • As their business grows, the funding capacity grows alongside them, unlocking larger investments as they need them
The cash position over time of a company using Capchase funding

Set yourself up for success by going the Capchase route

  • Increase ROI on your investments: Decrease your cost of financing by ~50% vs comparable funding sources (like venture debt)
  • Less stressful: Less variance in cash position gives increased comfort and control of cash position
  • Maximize impact of your work by spending less time on fundraising: Automatically unlock more capital as you grow by connecting your data to Capchase. In other words, you’re putting funding on autopilot
  • Lower risk: Flexibility to scale financing up/down depending on ROI on investments means Increased control to balance risk and reward
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