Seeking Strategic VC Funding Alternatives after SVB
After the collapse of the Silicon Valley Bank (SVB), the second-largest bank failure in U.S. history, many are left seeking VC funding alternatives for their SaaS clients.
On March 10, 2023, Silicon Valley Bank collapsed. Regulators closed the bank and the U.S. government announced all depositors would be made whole, making an exception to the standard that only deposits of and under $250,000 will be insured.
Despite this good news, the looming danger presented in this event is clear: had the regulators not acted promptly, the companies who banked with SVB would have faced consequential and immediate negative impacts. Without being able to afford payroll and other expenses, startups were at risk of shutting down.
In the aftermath of the collapse, private equity and venture capital firms are encouraging SaaS clients to seek alternative forms of funding. Feelings of anxiety toward VC funding are fresh. Whether you’re an attorney, CPA, insurance partner, growth advisor, or other invested party in search of VC funding alternatives to support your SaaS clients, venture debt financing is a reliable, strategic funding mechanism to consider.
Venture Debt Financing
Venture debt funding is a loan-based approach that delivers the fast, flexible funding that SaaS companies need to support their growth. This financing is more readily available to SaaS companies and doesn’t require current profitability. Companies that are earlier in their growth cycle can utilize venture debt financing when they haven’t yet met the criteria to receive institutional venture capital sponsorship.
Companies later in their growth cycle can utilize debt funding as a complement to their existing equity financing. When paired, debt funding can better enable SaaS companies to manage their runway between raise rounds and churn rate. Some venture debt solutions also don’t require your clients to give up equity, helping SaaS companies that have used equity financing before better manage their equity loss.
Some Venture Debt Financing is Non-Dilutive
At River SaaS Capital, our venture debt solutions are non-dilutive, meaning SaaS companies will not be required to give up shares in order to access their funds. With equity financing, capital gain translates to shares lost, and SaaS companies are faced with the task of managing their dilution and determining how much equity they are willing to yield in order to receive investments that can push their company’s growth forward. After events like the SVB collapse, the idea of immediately giving up equity in their company to obtain more funds may feel undesirable. With venture debt financing, they don’t have to.
Some venture debt financing agreements include warrants, which allow the lender company to purchase stock of the company they’re investing in later on, often at a fixed price lower than the standard. At River SaaS, we never take warrants. We believe that SaaS companies should remain in full control of their business decisions while receiving our debt funding, and our no-warrant approach supports that.
When considering VC alternatives, choose venture debt funding to allow your SaaS clients to maintain more ownership of their company while still receiving the funds they need to scale.
Venture Debt Financing is Fast and Flexible
Venture debt is designed to be rapidly available, allowing your SaaS clients to access the funds they need without stalling. It takes less time for debt funds to become accessible than traditional equity funding and other options, allowing SaaS companies to be strategic and act now. After the SVB collapse, the ability to quickly access new funding can be critical, and venture debt funding enables swift action.
Venture debt financing is also flexible in how it may be used. Equity funding and some VC funding alternatives are more rigid on what the funding can be used for, but venture debt offers greater freedom to ensure that SaaS companies are utilizing their funds in the way that supports their unique goals. Whether your SaaS client requires quickly accessible funding to support new growth initiatives or faster funding is required to support standard operations and payroll, venture debt is a vital resource that offers speedy support.
Venture Debt Financing is Tailored
Venture debt financing is a loan that will eventually require repayment, but there are many ways this loan can be structured to best serve the growth and needs of your SaaS company clients. At River Saas, we tailor our offerings to allow for greater flexibility and ensure the financial solutions we offer address our clients’ unique needs. We offer three debt capital solutions:
- Standard Installment Loan – This option provides SaaS companies with capital in a lump sum. Principal and interest payments will be due over a set period of time (typically 3 to 5 years) and tranches may also be utilized, allowing companies to take portions of the loan amount as needed instead of the whole sum at once. Whenever needed, principal that has already been repaid can be reborrowed.
- Interest Only – With an interest-only approach, SaaS companies will only owe the interest on their loan for a set period of time. This allows companies to keep and reinvest as much of their revenue as possible, helping to accelerate their scaling.
- Step-Up Structure – Similar to revenue-based financing, payments for this structure will increase as the revenue for the SaaS company grows. The strategic distinction for SaaS companies between this step-up structure and revenue-based options is that the terms or this arrangement are calculated and disclosed from the start so companies know exactly what to expect and how the payments are predicted to grow.
These VC funding alternatives offer swift, strategic support to your SaaS clients and can be tailored to best suit their unique needs.
Contact River SaaS Capital for Better VC Funding Alternatives
At River SaaS Capital, we’re committed to supporting SaaS companies with the strategic funding they need to grow swiftly and sustainably. Our debt funding solutions are warrant-free and never require any equity loss, and we’ve designed our process to get the funds into the hands of SaaS founders faster than our competitors. We tailor our approach to each individual company and work directly with them to ensure their funding strategy is a good approach for their needs and ambitions.
When you’re seeking VC funding alternatives to support your SaaS clients, contact River SaaS today to learn more about how debt financing can help.