Creating a synergy between equity funding and alternative financing allowed Owlin a fast trajectory to growth.
Owlin is an EU-based SaaS company with a natural language processing (NLP) platform that allows companies to monitor, analyze and extract insight from millions of sources simultaneously, across multiple languages. CEO and Co-founder, Sjoerd Leemhuis, had worked in finance for some time when he realized that while there was a lot of information available in relation to potential risk events, it was hard to analyze and assess that data in a way that was useful and timely.
While Owlin started by focusing on structuring the information for their customers and sorting it into categories to make it easier to digest, over time it has moved into analyzing the data and providing information on non-listed companies as well. This was a space where risk managers in the finance sector were struggling to obtain information, particularly in relation to what was happening globally. By providing analysis of foreign news in real-time, Owlin’s customers can track what is happening with non-listed companies in emerging markets, using dashboards, scores, and trendlines to quickly assess huge quantities of data and risk.
As Owlin adapted to the needs of its users in these ways, it needed the space and ability to grow quickly, and as a bootstrapped company, that meant looking for more financing.
Problem: cashflow troubles
Like many recurring revenue and SaaS businesses, Owlin’s cash flow heavily depends on its clients paying their invoices. Owlin works with large corporate clients who rarely pay invoices on the date they are issued, and those net30 or longer payment terms have a significant impact on cash flow.
Obtaining venture capital funding allowed Owlin to work on growth, but it wasn’t always the appropriate financing to use to deal with recurring cash flow issues.
“As soon as you start working with venture capital, then you know you want to grow your business by using leverage. And so non-dilutive financing is just a very small step on from that. These two types of financing do not have to be mutually exclusive,” explains Leemhuis.
Leemhuis had considered other options, including factoring, which had looked like a good option until he got into the details, where he realized it was a very expensive option. Leemhuis also considered bank debt for Owlin, which might have worked for them, but the banks were not responding quickly enough at a time when Owlin wanted to focus on growth.
Problem: removing uncertainty
Invoice payback period was not the only cash flow issue that Owlin had.
“We were really looking to remove the uncertainty where possible,” said Leemhuis. “As we knew large corporate contracts were coming, we didn’t always know the exact date they would be signed. Once we’d taken that uncertainty in our cash flow out of the equation, it meant we could focus on growth and move faster on decisions that really opened up the business to expansion.”
It’s not uncommon for startups to feel that stranglehold on their growth as they get caught up in the day-to-day details of managing the business's finances, even when they know that long-term, the company is profitable. Owlin was determined to leverage its financing and access working capital at a fair and flexible rate, ultimately accelerating its growth.
Solution: supplementing VC money with non-dilutive growth funding
Owlin raised Series A funding of $3.5M in 2019. Since then, they’ve partnered with Capchase to complement that venture capital funding with alternative financing.
Because of the types of corporate clients Owlin works with, they do not use a credit card or service provider model in relation to invoicing. Owlin assumed this would impact their ability to obtain an underwritten offer when it came to financing. But Capchase was able to connect with their banking and accounting systems and provided a fair and flexible offer. In doing so, this helped Owlin preserve their fundraising round and optimize for their next round by setting them up in the best financial position for the future.
“I don’t think a traditional bank would have been able to connect all these systems and provide an offer anywhere near as efficiently,” said Leemhuis. “This was such a great onboarding process, and we’ve had such a great experience with every contact point within Capchase. I think there’s something a lot of traditional banks could take from that about their attitude in relation to customer service.”
Growth potential unlocked
By removing the cashflow issues, Owlin could focus on the growth trajectory that they were aiming for, which was some key hires and expanding into the US market with an office in New York.
“Working with Capchase has been a great addition for us. It’s likely there will be another investment round in the future for us and we will be better positioned for that round when it's time because of using non-dilutive financing as we’ve grown,” explained Leemhuis.
Because of the efficiency with which Capchase can underwrite an offer, Owlin could focus on accelerating their growth and making confident decisions about how and where to expand their business, without having to worry about expensive terms, a complicated process of providing reports, or diluting their equity.
Learn how much you could finance with Capchase through our runway calculator.