Today, we made public our $4.6M seed round led by Bling Capital, SciFi VC and Caffeinated Capital. BoxGroup, ONEVC, Amara Venture Partners and Lorimer Ventures also participated in the round along with a number of high-value add angels. This is only the beginning of our journey to change the way SaaS companies fund their growth. I wanted to take this opportunity to share my thoughts on Capchase.
Before launching Capchase, 3 of the 4 cofounders — Luis, Guli and I — worked together at an early stage SaaSCo. We scaled quickly during 3 years and we experimented a lot around cash flow management and different types of financing. One thing that stayed along the journey was that our customers wanted to pay monthly and we wanted the cash upfront. The need to access and preserve cash became especially more acute in recent months, after the pandemic hit the US and the global economy.
Based on our own experience and after interviewing hundreds of founders, we have found a pattern in the cash flow and financing journey of a growing SaaSCo.
Early on, to drive traction, you sign customers in any possible way to reduce friction. Offering quarterly and even monthly payments. Customers are happy with that and sign up with little friction. Bookings quickly increase, but so do costs — team, infrastructure, sales & marketing. However, cash flows start lagging behind, trickling in on a monthly basis. Suddenly you see yourself facing a significant cash gap and you have to raise a round. It feels like a great achievement. But the dilution really hurts. You have just given up a large portion of your company just to fund your working capital.
Then you consider raising venture debt, but going through another 6–8 weeks process to get a small line worth 4x MRR feels exhausting. It is a huge distraction and it wouldn’t make a difference to your runway.
As a result, to avoid further painful dilution moving forward you decide to charge upfront. But your customers don’t want to pay upfront. So you start incentivizing them by giving them large discounts. Now, you are not diluting yourself, but you are giving up 20–30% of your topline in every single deal. And that is also very painful. It hurts the salespeople, because it is harder to reach targets and harder to get commissions and then it creeps up until it’s an issue at the board level too. At the same time, your customers get used to paying discounted prices and it’s hard to upsell in subsequent years.
On the other side of the table, as a former investor at TCV and now co-founder, Przemek saw a number of cap tables at series C/D where SaaS founders held tiny stakes of their Companies due to significant prior dilution.
As founders, we would love to get financing that doesn’t imply selling equity, that doesn’t affect our leverage ratio and that is easy to get and material enough to make a difference. There had to be a solution that would make both SaaSCos and their customers happy. But there wasn’t. So we built Capchase.
We don’t take equity and we are not debt. We simply advance revenues that SaaSCos would get in the future from customers they have already won and signed. Now customers can pay monthly — which has a huge value for them — but SaaS companies see all the cash upfront.
And the impact for SaaSCos is massive (runway extended by 30–60%). No more cash gaps, no more dilution — and very happy customers.
This is just the beginning. We are raising this round to improve customer experience, accelerate the approval process and increase the size of advances to each customer.
Welcome to the non-dilutive revolution. Welcome to Capchase!
P.S. Look mom, we’re on TechCrunch!