Growth capital tools are an ideal solution when you want to transform complex masses of information into an easy-to-understand chart, summary, or calculation for your business.
Using these tools can be beneficial since they help you make decisions, but finding the right tools is difficult. To help you get started we’ve selected our pick of the best growth capital tools and apps out there. To give you more choice, we’ve included both free and paid options.
Give these top tools a try and let us know which ones you get on with by sharing your favorites on Twitter.
Runway: A free, visual tool to help you understand, manage and extend your cash runway. (Free)
Float: Get a real-time view of your cash flow and make more confident decisions about the future of your business. ($49/mo)
Foundrs: Calculate the proposed equity percentage that each founder ought to receive based on time, money, and resources invested into the company. (Free)
Capshare: Issue stock and manage all your equity in one place without getting bogged down in spreadsheets and paperwork. (Free)
Bench: Get a professional bookkeeper at a price you can afford, and powerful financial reporting with zero learning curve.
Pilot: Pilot takes care of your bookkeeping from start to finish so you can focus 100% on making your business succeed.
At this point I’ve spoken to nearly every revenue based financier in New York, and one theme continues to rear its head, which is that B2B SaaS are the clear favorites of the RBF industry.
If you’re a B2B SaaS company with a regular income stream, you have a very good shot at obtaining Revenue Based Financing. I’d certainly recommend you check out all of the RBF Options we have available on our site, as I think you’ll find you qualify for quite a few.
The reasons for this are fairly obvious:
B2B companies have a higher price point and can typically afford to pay for a service for the foreseeable future.
SaaS companies inherently have steady revenue streams – thus making the borrower much more solvent in the long-term.
Have other questions we could answer? Feel free to reach out.
Are there topics you’d like us to write about or features you’d like us to build? Request it here.
I get a lot of questions about revenue based lenders, and you can obviously find all of the growth capital options yourself using our web app which will provide you with customized recommendations. However, to make it even easier for everyone who would like to do their own research please refer to the list below of revenue based financiers that we’re aware of. Do you know of any others? We’d love to hear about them! Please just drop the name of the fund / company here.
List of companies / funds that offer Revenue Based Financing:
There’s an incredibly counter-intuitive aspect of revenue-based financing, which is this: the more successful you are as a company, the higher the cost of capital associated with your RBF.
This is counter-intuitive for a few reasons:
It’s the opposite of how society typically views capital. If you walk into a bank and have a successful business, you’ll get a cheaper rate because you’re a less-risky borrower – not a more expensive one.
Most people – myself included – generally equate time with money. (You know, the old saying goes…). For example, if you take out a car loan and then pay it back earlier than expected, you’d pay less interest than if you took the full term to pay it back. This makes sense – the lender has their principal plus the pro rata interest, so now they can go lend it to the next person. And you, the borrower, just saved all of the interest that would have been accrued moving forward – had you kept the loan open.
It appears that RBF has a structure that punishes borrower for good behavior. In this case ‘good behavior’ meaning that they run a successful company. When someone is more successful than expected, are they expected to actually pay a higher cost of capital?
However, the kicker that will clarify it all is this: The amount of capital paid back in addition to the principal is set in stone, and time is the variable that can change, which is the inverse of the typical model. Compare this to the car loan example above in #2 – where the total amount of money paid back is flexible dependent on when its paid back, and the interest is fixed – based on a fixed period of time set by the lender. For example, many car loans may be structured for 60 months. Time is set in stone, and how much you pay back depends on your ability to pay that loan back faster (assuming no pre-payment penalties).
Let’s simplify and use some real numbers. Scenario A: If you were to take out a traditional car loan of $10,000 and pay it all back 1 day later. You’ll only have to pay interest on that 1 day when you had the capital. If you took out a relatively expensive loan and agreed to pay a 10% APR, that 1 day of borrowing would only cost you .027% in interest.
However, let’s run scenario B, this time using the revenue-based financing model: You take out a loan of $10,000 with a fee of $1,000. Most RBF lenders operate on this fee-based model which gives the borrower flexibility as to when they pay back the loan (i.e. time is the variable that can change). Now, no matter when you pay it back, you have to pay back $11,000. If you were to follow the same payback timeline as scenario A, and pay back the $11,000 the next day – your APR would be 3,650%.
Obviously RBF loans aren’t built to be paid back the next day, but the math illustrates an incredibly important point: revenue-based financing can be tricky to leverage, as you may actually be leveraging incredibly expensive capital if you’re more successful than you originally projected. It’s a relatively new model where time is a major factor in the cost of capital you use to grow your business – and adds to the complexity of your decision: which instrument do you choose to finance that growth?
Who actually acquires small startups and small businesses? If you’re not a high-growth rocket ship, or perhaps your business doesn’t fit within the corporate strategy of a tech giant like Google, then who out there is truly acquiring normal, healthy businesses that are growing a decent rate?
Empire Flippers: We take the friction out of buying and selling online businesses
Flippa: #1 platform to buy and sell online businesses
Respawn Ventures: Respawn Ventures buys, grows, and sells niche tech companies. Our focus lies within B2B SaaS but if we see a project with an opportunity for global reach, we’ll seriously consider giving it a second life.
Tiny Capital: We start, buy, and invest in wonderful internet businesses.
This directory is a living document and we work to update it as often as possible. Please contact the team at Bootstrapp if you would like to submit an organization for consideration — you can simply shoot a quick note to firstname.lastname@example.org and we will review your submission.
I’ve worked with tens of founders, many of whom are interested in non-dilutive capital despite the fact that they have zero, or very little actual revenue. So before we dive into the details, let’s make this easier on all of us and eliminate a few options right out the gate:
If your company doesn’t generate revenue, you can’t take on debt.
If you don’t have a high-growth business, you can’t take on equity financing.
Finally, if you want full control and ownership of your company, then don’t take on equity financing.
Put another way, the above three points can also be stated in the affirmative as such:
If you have revenue, you have the option between debt and equity.
If you are pursuing a low-growth business or a small market, debt is your only option.
If you want control and ownership of your company, debt is your best option.
At this point, you ought to understand generally which category your company fits within, and whether or not you even have the option to pursue debt as a method of financing your company. If you are generating a solid amount of revenue (at least $5k/month at a minimum) we’ll dig into the decision-making process in the next post.
And until the next post is published, to save you the time of scouring the internet, I’ve also gathered up the top articles on equity vs. debt and provided the main takeaway from each:
An example scenario of two identical companies – one that chooses debt, and one that chooses equity financing, and then shows the financial impact on each, which is a useful in demonstrating how the mechanics of each work. Article: Equity vs Debt Capital Funding: Comparing the Costs
Takeaway: “if you’re looking for a lower cost of capital for startups, venture debt is often the best way to go long-term (as this scenario explained). But, if you’re looking for operational funding to maintain your organization as you scale up or have already utilized debt financing, SaaS equity financing may be the better route for you.” (take this with a grain of salt as it’s a sales pitch).
Takeaway: “A company must maintain a debt to equity ratio that meets the capital needs of the company while not making the company fiscally vulnerable. An investor will be reluctant to invest in a highly leveraged business (i.e., has lots of debt) because the equity investment is always subordinate in priority of payment to the debt.”
Takeaway: None. However, this was the first article to at least mention the question of “How to choose between debt and equity financing” – they just didn’t answer their own question, and instead referenced the weighted average cost of capital (WACC) which isn’t relevant for a decision between debt and equity, but instead helps a company compare scenarios where BOTH equity and debt are involved.
Takeaway: “In comparing equity fund vs debt funds, tenures are usually longer for equity funds, while debt funds are categorised into short term and long term. Long term debt funds are raised for capital costs which have high-interest rates, and have company assets as collateral. Whereas short term funds are utilised in recurring payments, have lower interest rates and minimal collateral requirements.”
In my next post, we’ll get into the a more nuanced decision-making process for determining the best path forward among all of the financing options available to you – particularly if you’re a high-growth revenue-generating company, which essentially means the world is your oyster.
I have a hypothesis, which is that between the three options of: 1. Keeping equity 2. Reducing / eliminating any negative impact on your cash flow 3. Increasing the velocity of your startup / company
that you can only pick two. I drafted up a diagram to help illustrate the point:
To my mind, you can’t ever get all three of those corners of the triangle to align so perfectly that you are able to accomplish each goal simultaneously.
As an example, if you take out any sort of loan / debt, you obviously have put a dent in the future cashflows of your business, however you get to accelerate the velocity of your firm while keeping equity – landing you on the right side of the triangle.
If you don’t want to impact cash flow, or perhaps you don’t have any cash flow to speak of, yet you want to increase the velocity of your company – then you land yourself at the bottom of the triangle within the equity financing realm of the world. Get your pitch deck ready.
And finally, if you don’t want to – or can’t – reduce your future cash flow, and would also like to keep your equity, then you’ll likely need to simply bootstrap your company: that is, self-fund it.
It’s pretty simple. However, if you see any issues with the above mental model I’d love to hear them. Tweet at me if you have any thoughts: @thomasgrush.
Bootstrapp is building a community of founders interested in bringing more transparency to the early-stage investing + lending market. We believe that the capital markets that serve startups will become increasingly fragmented over time, and that owning the interface – where customer decisions are made – will create the most value for founders, Bootstrapp team members, and society.
We are a very early-stage startup that is working directly with other founders, non-dilutive financiers, and a small group of advisors
We are entering a decade which will likely uproot the traditional financial ecosystem – driven by the ability to programmatically manage capital, generate data-driven insights into true impact of investments, and a cultural shift towards equitable access to capital.
Description of the Director of Venture Strategy Role:
Implement an early-feedback loop to enable continuous feedback, learning and iteration for Bootstrapp’s products and services
Lead the development of a comprehensive go-to-market strategy which includes the ability to remain agile and react to market forces, customer feedback and more.
Create intellectual property, points of view and industry-related content which will help elevate your professional profile
Lead the development of the Bootstrapp corporate development strategy by deeply understanding the market opportunity, customer feedback, and product roadmap.
Ensure that the Bootstrapp team is consistently synthesizing market feedback to recommend opportunities for changes or improvements to be included in subsequent releases
Foster an atmosphere of innovation and excellent user experience for our customers
Support conversations with potential investors, advisors, and/or corporate partners.
Be honest with other team members and partners, have fun, and work on the things that you find the most interesting.
As Director of Venture Strategy, you will benefit from having the following attributes and experience:
A deep interest in value creation and startups.
A desire to learn about prototyping, design, FinTech, and technology-enabled services.
Considerable experience with strategy development, business planning and future-visioning.
Design or product development expertise preferred, but not required.
An ability to operate effectively within ambiguity – i.e. being able to understand how to create value as an individual and company, and then drive relentlessly towards it, as you will have full autonomy on how you achieve the goals that we mutually agree on.
Bootstrapp provides equal employment opportunities (EEO) to all employees and applicants for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, age or disability.
The first major venture capital deal was made in 1957, in the form of a $70,000 investment in Digital Equipment Corporation (DEC). Since then, the industry has hardly evolved at all, until recently.
Over the past few years, the pace of evolution has quickened. There are various investment models (the SAFE, the SEAL, revenue-based financing, and more). However, because the models are still quite young, there isn’t much publicly available data on them, let alone clearly defined definitions of each.
This post is a simple attempt to simplify the conversation. I’ll dive in much deeper in following posts, breaking each financial instrument down into its component parts so that we can better understand the mechanics of them, but for now let’s consider that detailed breakdown as out-of-scope.
Today, it’s all about simplifying the world of startup financing – particularly the non-dilutive realm. So let’s start with the basics:
How are each of the non-dilutive financial instruments defined in layman’s terms?
Leaning heavily on my experience in the startup finance space, lots of reading, research, and the collection of data on over 140 non-dilutive financing options, I’ve developed the below definitions. They are ordered roughly along a spectrum from debt → equity – meaning that the first item listed (Term Loan) is the most debt-like, while the last (SEAL) is the most equity-like.
Have a different perspective? Do you disagree with any of the definitions above? I’d genuinely love to hear your thoughts. Please shoot me a note or comment so that we can develop a shared language (i.e., a commonly understood set of references, visions, experiences, and/or interactions that provide a foundation for strong communications) with regards to non-dilutive financing.
With definitions of each type of financing somewhat settled, I then captured all of the typical attributes of each as well:
There are certainly exceptions to the typical attributes as I’ve outlined them above. However, in my experience these are directionally correct in the vast majority of cases. If you disagree – please chime in so that the entire community of startup founders can benefit.
No silver bullet
With a very general and broad understanding of the financial instruments we’ve covered here, it’s clear there is no silver bullet for all founders, and there’s no way to be 100% certain that a particular source of capital is the best one. However, after speaking with hundreds of founders looking for funding, it’s become incredibly clear to me that it’s really difficult to even understand the trade-offs between the various options. And if you can’t even properly account for the trade-offs, a founder can’t be expected to make the best decision for their company.
As such, this is a framework that is meant to help all founders consider what trade-offs they are making when they decide to choose one type of financing over another.
Hope it helps, and reach out to our team if you have any questions about anything growth capital-related.
First off, there are no golden rules that come to the world of financing. As any mortgage lender would say, they “take into account numerous factors.” But that’s not very helpful, is it?
What is helpful, is knowing precisely what works. And from the numerous conversations I’ve had with lenders, investors and financiers overall, the ideal business to lend to is this:
A B2B SaaS company, generating $100k in monthly gross revenue with 80 – 90% profit margins.
Easy right? You just have to go build the perfect business and then someone will finally lend you some cash. But that doesn’t mean you must meet all those criteria for funding. Far from it actually.
In fact, we have an investor in our database who funds a revolving line of credit for as little as $1,000. Now THAT seems reasonable. You don’t need a 90% margin, million-dollar run rate business to justify $1,000 in credit. What do you need? Use our web app to find out.
If you want to learn about revenue-based financing (RBF), you typically end up at a site where they are also trying to sell it to you. And as a result, the message gets muddled. All of the benefits of RBF are raining down on you from on-high, and along with them, the trade-offs have been stripped out.
If you’re thinking of RBF, you’re going to be making trade-offs, so let’s display them loudly here:
You’ll pay more cash long-term, in order to pay less during your months with lower-revenue.
That’s the primary value prop of RBF. Your repayment of the loan goes up and down with your revenue, which is great, because as a startup you’re no longer stuck servicing a debt that you may not have the revenue to properly cover if you’re going through a slow month or two. The repayment adjusts to the performance of your business. However, as a result, the lender is taking a bit more risk on you. i.e. What if every month for your startup ends up being a “down-month”? Well, to make up for that risk, they charge higher interest.
Lighter Capital for example, explains that “repayment caps usually range from 1.35x to 2.0x”. This means that the greatest amount you’ll pay back, regardless of what happens with your revenue, is 1.35 to 2 times the amount you borrowed. Seems simple enough.
That is the “cap”, which feels good to have a limit on how much you’ll be forced to repay. On the other hand though, if you went into a bank and they informed you that you’d be paying 100% APR on a loan, it may sound somewhat ludicrous. Essentially, you’ll likely be paying a high interest rate, but you’re getting lots of flexibility in return.
You’ll also give up far less long-term, than you would otherwise with equity-based investments from an angel of VC (that is, if your startup does well).
Paying 2x the amount of the loan seems outlandish, that is, until your startup succeeds and you compare it to equity. 2x on a $500,000 RBF loan that helps you scale is certainly hefty, but it’s nothing compared to 20% of equity in a company that ends up being worth $10M. Instead of paying $500,000 of effective interest, you’re giving up $2M in equity at the exit (in this scenario at least). Those numbers obviously get even more dramatic if your company grows beyond that and becomes worth more. Imagine having a $50M startup, giving up $10M in equity – all when you could have taken out a $500k loan and paid a “measly” $500k in interest back on that over time. It kind of hurts to consider.
Revenue-based Financing is non-dilutive.
Simple. You’re trying to attract the best talent. If you have more equity on your cap table, you have more flexibility when creating compensation plans for potential co-founders or employees.
Save yourself time.
If RBF is a good fit for your company, you won’t have to spend 4-6 months doing the VC roadshow. Assuming you qualify, there are typically a few meetings, a few emails, and some paperwork and then you’re off to the races. Much better than pitch after pitch, and then driving the VCs to a close.
The obvious caveat: All of this only works if you are generating revenue. It may be obvious, but let’s be explicit. If you’re super early-stage and don’t have revenue, RBF will clearly not be a fit. You then may have to go the angel / pre-seed route.
See what we’re working on as it relates to revenue-based financing over at Bootstrapp. I also plan to keep digging deeper into this subject moving forward so stay tuned and let me know if you’d like to see anything else in particular.