Just Released: Growing in Complex Times with Venture Debt
Finding a Way Forward During Complex Times
As a SaaS company founder or leader, you know how much the pandemic created opportunities and caused challenges for SaaS companies. Greater interest in and need for digital transformation, cybersecurity risk mitigation, communication for remote workers, and more all led to record levels of deal activity in the SaaS — and greater technology — market throughout 2021.
SaaS companies were being acquired or valued based on strong multiples, essentially allowing them to command the valuation they wanted. And while equity funding was less costly and thus more available last year, global events, inflation, and other difficulties have frustrated or outright delayed SaaS founders’ financial plans — from making growth capital more difficult to obtain to experiencing repricing when attempting to go public.
As our latest ebook explores and will be summarized here, venture debt financing stands as a key opportunity to help companies both bridge the gap between today and a more secure tomorrow while still making progress on their growth goals.
It’s an Alternative to Less Available Capital Sources
Even more before the challenges that SaaS companies are experiencing today existed, only so many funding avenues were available for founders and leaders to consider. VCs, angel investors, debt lenders, and banks have been the most common. But with banks requiring collateral that SaaS companies often don’t have and equity-based options diluting ownership and restricting freedom (to say nothing of rising interest rates and the lower availability of equity), venture debt stands as an accessible, flexible alternative:
- It’s often non-dilutive, so founders retain full ownership
- No board seats are required; founders stay in full control
- Debt closes faster and without traditional collateral needs
It Helps You Reduce Burn and Increase Profitability
With investors taking a more cautious stance, profitability and burn rates that are under control will be key requirements for obtaining growth capital today and for some time. SaaS companies with high burn rates or that are still working toward profitability will have difficulty getting the resources they need to grow — but this is where venture debt shines:
- It can be customized according to the growth strategy and need
- Tranches can be taken out to avoid paying more interest
- An interest-only structure offsets principal repayment to focus on growth
- It’s designed to accelerate sales and marketing and thus growth
It Strengthens Future Exit Outcomes
If you were considering an exit or other major financial benefit, whether as a result of an acquisition or from going public, it’s likely that you’ll be delayed. Many founders have delayed their exits to focus on growing the company and withstanding potentially difficult times. With equity becoming more expensive (requiring even a greater ownership percentage in the company), debt plays a meaningful role here in that:
- It will be more available than VC money
- You’re only repaying a loan — not paying dividends
- Your outcome will be stronger due to ownership retention
- Debt can be put to work faster to achieve growth goals
It Strengthens Customer Success
Customer success (CS) has been a significant focus for the SaaS industry over the past couple of years, and for reasons that are more valid today than ever: retention rates, satisfaction, problem mitigation, identifying opportunities, and more all contribute to growth. While equity can be used to grow the CS function, it may be difficult for all of the reasons already outlined above. Debt opens the door to a stronger CS team and results because:
- You can use the funding as you wish (i.e. for CS)
- No dilution means CS benefits the business directly
- CS benefits founders’ exit opportunities long-term
Explore Your Debt Options with River SaaS Capital
With incredibly flexible debt funding solutions that can be tailored to support your growth goals, River SaaS Capital is well positioned to help you navigate the challenges that SaaS companies are facing today. Whether you’re looking for a solution to help you extend your runway until your next raise round, are looking to accelerate sales and marketing efforts, or are interested in capital for other strategic purposes, our partnership guidance, non-dilutive debt products, and focused expertise on the SaaS industry will keep you moving forward — your way.
Fill out the form below to get in touch with our investment team to answer any questions you might have. Or, if you’re ready to move forward, you can apply quickly and easily right here.