Pipe Raises $6 million to Launch New SaaS Financing Platform
Advancing the Value of SaaS Contracts, Pipe Defines Important New Financing Category
Pipe, a new financing platform for SaaS companies, announced it has raised $6 million in Seed funding led by Craft Ventures, with participation from Fika Ventures, MaC Ventures, Naval Ravikant, WorkLife Ventures, Liquid2 and The Weekend Fund.
Led by serial entrepreneurs Harry Hurst, Josh Mangel, and Zain Allarakhia, Pipe offers non-dilutive financing to SaaS companies: through an instant cash advance against the full annual value of software subscriptions, Pipe turns MRR (monthly recurring revenue) into ARR (annual recurring revenue). Designed for SaaS companies that can benefit from immediate payment, Pipe enables companies to grow without additional costs to their customers, and without diluting their current cap table.
“Until now, the main financing option for SaaS companies has been dilutive equity rounds,” said David Sacks, Co-Founder & General Partner at Craft Ventures. “Pipe is the tool every SaaS founder has been waiting for. It allows SaaS companies to grow without dilution by financing their SaaS receivables.”
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Pipe is addressing a $250B worldwide cloud services market, which is growing 17.5% year over year. By advancing capital against their recurring revenues, Pipe removes a critical growth obstacle for many SaaS companies. Pipe’s platform assesses customers’ key metrics by integrating with its accounting, billing, and subscription management systems – and makes an instant decision on whether the company qualifies for a PipeLine of finance. Facilities range from $10,000 per month to several million dollars per month for later-stage companies.
“SaaS companies have wonderfully predictable recurring revenues that, assuming negative churn, last forever. The problem is that their customers want to pay for their subscriptions monthly or quarterly,” says Harry Hurst Co-Founder and Co-CEO of Pipe. “Founders of high growth startups find themselves discounting revenues by as much as 40% to entice customers to prepay annually, and at the same time raise dilutive equity capital to bridge the gap between the cash flows.”
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AngelList CEO & Pipe investor, Naval Ravikant urges SaaS companies, “Pitch customers, not investors, and let Pipe convert subscriptions into instant, dilution-free financing.”
Fountain CEO Keith Ryu commented, “Having efficient cash flow is mission critical for us to scale. We often risked losing deals by requiring annual upfront payments when customers wanted to pay monthly. Pipe solves this for us and allows us to invest more heavily into our growth. It may easily save us a fundraise.”
Jon Runyan, General Counsel of Okta explained, “Having overseen thousands of sales and contracting processes during my career, I instantly saw the value in Pipe’s elegant solution to the payment term vs. cash flow problem that so many companies face.”
“Pipe is creating a new asset class for investors: a fixed income-like product to yield attractive returns from asset-backed, predictable, recurring revenue streams,” continued Hurst.
“Software contracts are better than first-lien debt. You realize a company will not pay the interest payment on their first lien until after they pay their software maintenance or subscription fee. We get paid our money first,” said Vista Equity Partners CEO Robert Smith, in this Forbes article in 2018.
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