From $50k ARR to $10m+ ARR with No Dilution: Supercharging Growth with Capchase

All right, good morning everyone. Welcome to Faster Money. We're thrilled to have Cecily Saki and Alex Pedraza from Capchase to join us for this session. They will be discussing from $50K ARR to $10 million ARR with no dilution, supercharging growth with smart cash management. There will be time for Q&A, so please make sure to drop your questions throughout the session into the Q&A box below. If you can turn to the next slide. We're going to go through some housekeeping notes. Welcome, uh, drop in the chat where you're joining us from. We would love to hear. To submit a question to the speaker, use the Zoom Q&A in the bottom toolbar of your screen. This is a 20-minute session with time for Q&A at the end, so be sure to send in your questions throughout in the Q&A chat box below. These sessions will be recorded and available post-event. Be sure to follow SESTER on SlideShare and subscribe to our YouTube channel. Join me in welcoming Cecily and Alex. Take it away.

Great. Thanks, Cynthia. And again, thanks everyone for joining the session. We're really excited to do this. Next slide, please. So just kicking things off, I'm sure many in the audience are familiar with the point we're making here on this page. In terms of what a typical cash flow profile looks like for a SaaS business. So on one side, on the revenue side, typically, typically you see recurring and predictable revenues coming in. And on the expense side, in many cases you see rather chunky and unpredictable expenses going out. And what ends up happening is this— there's essentially a mismatch between revenues and expenses that ends up just making it difficult for management teams to, to, to run the business instead of focusing the majority of their time on just building great products and focusing on growth. Next slide, please. Kind of building on, on the last slide, what does this mean in terms of the, the, the cash flow profile that I just described that essentially ends up with cash getting trapped? And what do we mean by cash getting trapped is, so you have revenues that are recurring in nature, that there's certainty that they're going to be coming in in the next months, but you don't have access to them now. And again, on the expense side, you have these chunky large expenses that you do have to incur now and can't until now push out to the future. So in an ideal situation, obviously what you would be able to do is you should be able to pull those revenues forward and be able to push those expenses out. As you can imagine, this, as we're, the point we're making here is this is the way that you really untrap cash. And as you can imagine, if you deploy that back into growth, the impact that that would have on your customer base is significant. So if a solution like this existed, the question is, would you take it? Next slide. So in the next couple of slides, we're going to just go over how this solution would work. So just kind of starting, starting off on this page, what historically have been the options for companies to really, when they're thinking about untrapping cash or dealing with cash flow needs or cash flow mismatches, the traditional alternative was venture capital in terms of venture debt or venture equity. Here on this page, as an example, we're talking about venture debt, and really this is traditionally a product that hasn't changed much. It's— most providers have these common characteristics where they're not really tied to ARR. Sometimes they're not even that material in terms of the size. Their payment periods can be fairly restrictive. And long in nature, so 3, 4 years and beyond. Warrants are typically attached to most of these solutions, which can become fairly expensive. And these solutions really don't scale with the customer, meaning you get your credit line, you pay it back, and then if you want to continue, you have to essentially restart the process, which could be very long, very expensive with legal fees involved. And includes pretty restrictive covenants and other types of restrictions. Next page. So now we have what we think is an optimal solution, a new solution called revenue finance. Revenue financing is something that at Capchase we've really focused on since inception, enjoyed a lot of success with it, really proud of how it's impacted our customer base. How we've seen our customer base be able to grow with us. And really what revenue financing is, is a way for our customers and just customers in general being able to bring a year's worth of future revenues to the present and use that capital to accelerate their growth. So we think that this is really the, the way that especially for technology companies that have recurring revenues, SaaS businesses, This is the optimal design of a product, and it's really at least a— captures how we're focused. We're focused on speed. We're able to underwrite and fund our product or advances in less than 24 hours. Flexibility, so our customers are able to take as much or as little as they need when they need it. And scalability, so we really grow with our customer base. So As our customer grows, their— our ability to extend capital to them grows as well, and through that relationship, through time, costs decrease. So it's really a partnership as we see it.

Next slide.

So I just wanted to let the attendees, if you can keep your mic on mute.

Thanks for that reminder, Cynthia. So I head our customer success team at Capchase, and I just want to highlight a real-world example of how powerful this solution can be to really supercharge the growth of the many companies that we work with. So here's an example of a customer. They came to us with really flat, you know, growth month over month, $50K in ARR, and using our revenue financing solution because we're fast, because we're flexible, because we're able to help customers use that revenue that they would realize, you know, without us in the future, use that revenue upfront, power it into the tactics such as marketing, hiring salespeople, things like that. This customer is really able to supercharge their growth, you know, to $3.8 million in ARR in 5 months working with us without dilution. So it's a super, super powerful tool And something that, you know, I think many customers can benefit from. Next slide. And so we start off talking about revenues on one side of— as an issue to trap cash, revenues that you might realize in the future that you can't access upfront. But the other side of the solution are expenses. A lot of SaaS companies that we work with have very chunky expenses that come up. You know, commissions, contractor, lawyer fees, software expenses, and having to pay that upfront, not able to smooth that out, that can really kind of derail your cash management, you know, strategy. So in an ideal world, you'd be able to, rather than pay these expenses upfront, you'd be able to kind of push them out and smooth them out. Next slide. And so now we have a solution that can actually help that, help you do that. So introducing Capchase expense financing. We're launching it today. You guys are some of the first people in the world to hear about it, and you'll be able to sign up after, at the end of this, with our QR code, sign up for our waitlist. In the next slide, Alex will be talking through how it actually works.

Thanks, Cecily. So yes, we're super excited to be able to share some highlights on how the product is going to work. So again, this is that second component of how we see cash being trapped, and really The realization of the opportunity for us and just to serve our customers with the new product was really, it came from conversations that we had with our customers where we learned that, you know, this lack of good solutions that they had to be able to finance specific expenses. They actually were trying to use our current product to be able to solve for this. So the more and more we heard about this, we realized the large opportunity that existed And when we looked at the market, we saw that there are not any type of solutions that are focused on the SaaS customer or the B2B customer to be able to push expenses out as we're doing here. So very simply, how the product works is our customers are able to select either incurred or pending expenses. As Cecily mentioned, of the type of including sales commissions, contractor invoices, legal bills, all these fairly large expenses in nature. They're able to select whichever the ones that they want with total flexibility and push them out into the future over a 12-month term in equal installments. So the product really gives the customer the absolute control in terms of being opportunistic and identifying which expenses they rather pay now versus which expenses they want to push out to the—

Next slide. And so we've been beta testing—

Sorry, could you pause for one second? We're getting a bit of an echo. Okay. Okay, try now, Sasli.

How's this? Is that better?

Yeah, much better. Thank you. Awesome.

So want to just share with this group, in our beta testing of our expense financing product, we worked with a UK SaaS company. They had an opportunity to partner with a big social media influencer, but to kind of pay for that, partnership. They used our expense financing solution. They were able to use it to smooth out that and spread out the expense over 6 months. And because they were able to use our solution to power their growth, that resulted in a 77% uptake in business and 20% month-over-month growth. They were able to accomplish this without taking a big hit on cash position. And so just one of many examples, you know, we've, we've worked with hundreds of companies who've added over 2,000 months of runway, avoided 150 funding rounds, and added $190 million in ARR, between $2 to $4 billion in equity value since working with us using our expense finding solution and our revenue financing solution. Next slide.

Thanks, Cecily. So to close it off, now thinking of what happens after $10 million ARR, So at this point as a company, you've successfully raised a massive Series B, have notable investors on board, your management team has spent a considerable amount of time fundraising, humongous effort, and what do you do next? So you have really two options in terms of how you think of this capital. You could use it as your core, capital base now and use it both for R&D and growth. Or another alternative is you preserve all of them or most of that really expensive capital and instead you grow with capchase. So we, based on what we've seen with our customer base and how our product works, we think that the second option is really the optimal option. Where customers can really use our capital to deploy into growth, where we're already seeing our customers grow or their growth rates really tick up as they partner with Capchase. So yeah, this is really what we think is the optimal solution. Next slide.

So our top takeaways are Raising traditional cash can be onerous and burdensome for SaaS companies. You should be focused on your business, not focused on fundraising. Chunky expenses can destroy your growth goals if you don't manage them appropriately. So working with us, you can maximize your cash flow by bringing your revenue forward and pushing your expenses out. Next slide. Thank you so much. You can use this QR code in front of you to sign up for our product waitlist of our expense financing solution. And we'll just open it up to Q&A right now.

Great. So I'm seeing the questions trickling in now. So one question from the audience is, why now? What has changed? Assuming this means why revenue financing has become available recently. And really it's two things. One is, well, just the general SaaS and subscription-based online businesses is in the grand scheme of things fairly recent. So that's one reason. And the second reason is technology. The way that we, or the way that the revenue financing product, how it exists today, it's really, it depends on being able to access data real-time. That's how we do it at Capchase, at least. And some of the ways to be able to get these— this data real-time was not available until fairly recently, as most of you know. See a question here on, can you clarify your typical financing terms? So yes, so our financing term, it typically goes out to a 12-month terms where our rates, depending on the stage of the company, can go from low to high single digits. And we finance companies down to $100K in ARR and beyond. So we have— our customer base really ranges up to, you know, above $100 million in ARR.

Cool. I see a question here. How are founders reacting to revenue financing in comparison to, let's say, 12 to 24 months ago? How do you think this will change moving forward? I think in its infancy, we were kind of doing a lot of customer education, what the impact could be, what exactly it means, how it works, why us versus other alternatives in the market, venture debt. VC, etc. I think now that we've gotten some momentum, we have some success stories that we're sharing, you know, our founders are also talking to other people in their network. It's, it's becoming a lot clearer. It's, and as you see the product, it's super simple and fast, and so I think it's resonating and it's having an impact.

I see here a question of what is the difference between receivables financing and factoring, at least revenue financing and factoring. So Factoring traditionally is tied to invoices, so you're really trying to advance the 30, 60 kind of payment period that you have on invoices. The way that revenue financing works, at least here at Capchase, we're really advancing against the future revenues, again, up to 12 months of AR. So there, we hear that a lot of the parallel and a lot of people ask this question, but the way that it works and even to a certain extent the purpose of it is slightly different, or not slightly different, it's actually quite different. So question here. How much of a complement or substitute is this product to VC funding? So we actually see revenue financing as a complement. We think that this is actually something that VCs should be recommending to their customers in terms of they've invested in a company, they've seen the amount of time that has gone into it and Instead of having their portfolio companies have to go back 6 months later and go back into the market and spend that amount of effort, really with revenue financing, it's an easier way to be able to get additional growth capital. They don't have to worry about dilution and their portfolio companies are really able to extend their runway 4 or 5x of what they would've had, had they not been using revenue financing.

Well, I see a question here. If I can leverage products that pay a percentage of my MRR, does that influence when I should push for monthly versus annual contracts? I think that's a great question because it kind of speaks to our value prop and our— in the use case, you know, your customers typically will probably prefer to pay monthly, like you would probably with your expenses. But, you know, with CAPTCHAs, you can kind of realize that, that that funding up front. So you give your customers that flexibility and while still receiving the benefits for having the cash. And so I think that just like creates a great customer experience. It's something that if you're interested in, you should reach out and contact us now.

There's another good question here. Do you think revenue investing can be used for non-startup businesses? Definitely. The core use case for revenue financing is really focused on companies that have, be it early stage or late stage companies that have recurring revenues. So yeah, that's, it's really not limited to startups. At Capchase at least, we're definitely focused on tech-enabled companies that have recurring revenue. So that includes later stage companies for sure.

Alright, so we're just about at time. In closing, I wanted to thank Cecily and Alex for a great session. We have a lot more great content today, so see you guys in the next session. Have a great day.

Thank you.

Thanks everyone.

Bye.