For SaaS founders, the growth journey requires more than just a strong product. From marketing efforts to the development of sales teams and so much more, scaling requires SaaS teams to carry out a multitude of growth initiatives, and these initiatives require funding. As private equity deals continue to decline and uncertainties loom for institutional funding, it’s time to turn to more strategic financing for growing a SaaS company — venture debt.
Read on to explore common types of financing for growing a SaaS company, what venture debt is, and why it’s uniquely positioned to support growth-stage SaaS companies. Later, learn how you can partner with the right lender to maximize your growth potential.
Common Types of Financing for Growing a SaaS Company
Equity financing, institutional funding, and venture debt financing are three common options for financing for growing a SaaS company, but one remains the most strategic for early-stage SaaS companies.
Equity financing allows companies to trade equity percentages for financial support through venture capital. For the last two years, venture capital deals have slowed. Despite the amount of funding available, deals are drying up, and it’s becoming increasingly more difficult to secure funds, especially for early-stage companies. This leaves many SaaS companies tasked with the challenge of raising their valuation and becoming more competitive in the venture capital space but with none of the funding required to do it.
Institutional funding from banks is another common option, but uncertainties and hesitance loom for many after the collapse of the Silicon Valley Bank, a bank that was used by many SaaS companies. It can also be more difficult for early-stage companies to secure bank financing because they often lack the collateral assets and proven growth that banks require.
Instead, turn to venture debt, a reliable and strategic funding mechanism uniquely designed for growing a SaaS company, no matter your stage.
Understanding Venture Debt
Venture debt funding has become a popular choice for those seeking better financing for growing a SaaS company. With venture debt, companies can borrow money in the form of a loan, then repay it over a set period. It offers a variety of unique structures that allow companies to tailor your financing to what best serves your unique needs.
Should you want to accelerate your growth by reinvesting more profits into your business, interest-only forms allow you to pay only interest for a set time, preserving your profits for swifter scaling. If you’d prefer to start with lower payments that grow as your company’s revenue grows, step-up structures might be the ideal match instead. When you opt to stick to a traditional installment loan structure, you can expect to pay interest and principal payments for a set period, and you can also utilize tranches to borrow exactly what you need when you need it, keeping your payments lower.
Venture debt can support your growth journey on its own, or you can pair it with equity financing. Together, debt can help you raise your valuation before the next raise round, and help you manage equity dilution. Unlike equity financing, venture debt doesn’t require you to give up equity in exchange for capital. This is one of the many features that makes it an ideal choice for growth-stage SaaS companies.
3 Key Reasons Why Debt is Better Financing for Growing a SaaS Company
Supports Your Unique Path
Venture debt is designed to be used flexibly, empowering you to finance growth initiatives that best support your unique needs. For some growth-stage SaaS companies, building out a bigger, better sales department is the top priority. For others, the road to growth may involve more strategic marketing. Whatever your unique path to swift, sustainable scaling, venture debt provides fast, flexible financing to support your journey.
Empowers You to Maintain Ownership
For growth-stage SaaS companies, maintaining ownership can often be essential in the beginning. When SaaS founders are in charge of their equity dilution, they’re empowered to operate with greater control as they scale. Alternatives to venture debt are often unsupportive to early SaaS companies, and companies that pursue equity financing may have to relinquish a higher percentage of equity in order to get capital. With venture debt, your ownership decisions are in your hands. Mitigate your equity dilution as you desire while receiving the financing you need to support your growth.
Enables You to Act Now
For founders eager to grow, the lengthy processes and delays associated with other funding options like venture debt serve as roadblocks to growth. Venture debt offers a smooth process with funds that become available much sooner than other forms, allowing you to act now. For motivated SaaS companies, this strategic financing choice allows you to start accelerating your scaling faster and carry out growth initiatives now, not later.
Choose River SaaS for Strategic Financing to Support Your Growth
At River SaaS, we’re committed to providing strategic financing for growing a SaaS company swiftly and sustainability. Whether you’re in the earliest stages of growth or you’ve witnessed continuous growth and want to accelerate it with smarter financing solutions, our funding structures are uniquely designed to support you. We offer standard installment structures in addition to interest-only and step-up options, each of which is tailored to best serve your growth journey.
At River SaaS, we take a relationship-based approach to our financial relationships, offering more than just capital to help you flourish. Leverage our expertise and powerful growth insight to skyrocket your scaling in the year ahead. We’re proud to have supported so many exceptional SaaS leaders and eager to help you grow your company with the right financing too.
To get started, fill out the form below or contact our team today to learn more about how we can best support you with strategic financing for growing a SaaS company.