One of the biggest challenges of any business — and growth stage SaaS startups in particular — is cash flow management. Especially when funds are moving quickly, it’s tough to ensure that there’s enough of a financial foundation in place.
That’s why so many startup founders turn to venture capital (VC) as a solution for extending their financial runway. With cash on-hand, companies have the buffer to take calculated risks and pursue untapped growth opportunities.
Meanwhile, VC is only one tool in a company’s overall financial toolkit. It’s important for startups to build their credit histories with access to different tools like credit cards, lines of credit, and other resources.
Capchase has created a financial product for this exact need, for high-growth SaaS startups with monthly recurring revenue (MRR) business models. It is a type of non-dilutive funding, meaning that founders do not have to give up equity in order to be eligible for this financial product.
Across our customer base, a question we frequently receive is whether to wait to use non-dilutive funding. Here are some answers.
Ultimately, the decision of when to use funds is up to the discretion of your company’s CEO, CFO, and other business leadership. Every business is unique, and there are many variables to consider when building a healthy financial picture.
Many of our customers choose to use non-dilutive capital from Capchase sooner rather than later, for a few reasons:
After years of hard work, it’s important that as a founder, you receive the outcome and financial compensation that matches your level of contribution. That means protecting your equity. Accessing non-dilutive funding now vs 6 months from now could be the determining factor of how many x you’re able to grow your ARR.
Some of our customers use an add-on product, Capchase Earn, to our core financing solution, Capchase Grow, to reduce the cost of their capital. If you’re new to the term cost of capital, this article can help provide insight.
For reference, here’s a quick summary of key points:
Ultimately, every business is different. So you need to make responsible decisions for your company’s specific financial goals. Non-dilutive financing allows you to grow faster and get better valuation, which is a win-win scenario for your business. Additionally, with the current volatility in the capital markets, it’s hard to predict how much and what kind of terms you might be offered from funding sources. Non-dilutive financing allows you the take the reigns and access what’s at your disposal for growth today, especially with uncertain times present.
There are many options for non-dilutive capital. It’s normal for financing partners to establish terms for what you can or cannot do with these funds. At Capchase, we do things differently in that we offer autonomy to founders and CEOs on how to spend the funds..
Here are some common ways that we see companies using revenue financing for growth at Capchase:
We have a few case studies to help you gain a deeper understanding of how different high-growth SaaS businesses use non-dilutive funding:
If you’re curious to learn more about Capchase, a valuable first step is to get in touch with our sales team. We can help you create a clear financial picture for potential revenue based financing options.
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.