Capchase raises $125M to offer subscription firms an alternative financing solution

The US-based fintech will use the mix of debt and equity to improve its core products, add new features, and expand to the UK and Spain, per PR Newswire. Capchase gives B2B software as a service (SaaS) companies between seed and Series C stage access to cash based on their future recurring revenues. The fintech draws the cash directly from its balance sheet.

Capchase’s financing is proving popular among SaaS firms as an alternative to diluting ownership or having to repay interest. Traditional equity capital raises and loans fuel short-term growth but can also reduce startup founders’ ownership of their companies and saddle them with high-interest debt—especially for untested seed-stage firms. Rather than take equity or charge interest, Capchase gives firms 90%–95% of their total annual recurring revenues and pockets the difference. Business is already booming: Capchase has already issued more than $390 million in financing to over 400 companies just eight months after launch, and it expects to have grown 400% by the end of the year.

Capchase’s balance sheet model may limit its scale compared with its fast-growing peers:

• Capchase isn’t the only revenue-based financing fintech seeing staggering growth. Last month, US-based Pipe scored a $2 billion valuation less than a year after launch, while its European counterpart Uncapped raised $80 million. Both fintechs also offer SaaS firms cash upfront based on their recurring revenues, but unlike Capchase’s balance sheet model, they fund the capital via investors on their marketplaces.
• Relying on its balance sheet and fee structure could limit how many firms it can fund at once. Capchase says its platform lets companies access cash faster and with more certainty than the marketplace model, in which investors must first be interested. But Capchase could find it harder to scale because it ironically depends on outside debt raises, like part of the $125 million, to fund financing. It may not be able to keep up with companies that can quickly and easily add investors to a marketplace. Its 5%–10% fee is comparable to Uncapped's 6% and 12%, but that is taken from each new sale until the debt is paid rather than being discounted from the cash upfront.