What is Equity Financing?
Equity Financing Solutions
What is equity financing and when is it beneficial for a SaaS company to use it?
Equity financing is just that — obtaining capital in exchange for equity in a business. It comes through a variety of channels: venture capital sponsorship, angel investors and private equity firms. Investors receive a percentage of the company, with the amount determined by stage of investor, level of performance and amount of capital needed.
Equity investors typically require a board seat so they can have a say in the direction of the company and to ensure they realize their investment. While this is often accompanied by access to an investor’s valuable knowledge and contacts, success is often influenced by a company’s culture and its founders’ willingness to relinquish some control in exchange for a potentially significant investment.
A benefit to equity financing is that it does not require principal and interest payments. Once equity funds are applied, profits do not have to go toward repaying debt. In the event a business does not succeed, this type of financing typically does not have to be repaid.
Where Our Equity Financing Fits In
River SaaS Capital offers equity financing solutions as a complement to its existing SaaS debt financing solutions. These investments are made to established borrowers whose capital needs have shifted, making equity a strategic option.
“We appreciate their flexible structure and ability to invest with us over time.”
CEO, Etail Solutions
Frequently Asked Questions
Who is River SaaS Capital?
River SaaS is a provider of alternative venture financing to early-stage SaaS companies throughout the U.S. Our management team has more than 100 years of combined lending, credit and operations experience. Along with our knowledge of and passion for technology, we have the precise blend of talent to help early-stage technology companies grow their business. Proudly based in Cleveland, Ohio, we offer alternative financing models, entrepreneurship mentoring and a long-term, partnership-based approach.
What types of companies do you fund?
Our financing model is best suited for software and technology-based companies that market their products using the software-as-a-service (SaaS) model. These high-growth, high-margin companies are well-suited to debt financing options, which allow them to preserve equity while still raising working capital.
What is your geographic focus?
We provide financing to U.S. companies only.
What is your due diligence process?
Our process starts out with a comprehensive list of questions that focus on the borrower’s technology and product offering, management team and business plan. We review historical financial statements as well as projections for the next 24 to 36 months, and we analyze the borrower’s current customer contracts to make certain they have subscription-based revenue spread over multiple customers. We then evaluate the sales process and meet with company executives to verify their experience and ability to grow and scale the business.
Is there a minimum or maximum financing amount?
We typically lend between $500K – $1.5M (or around 4x MRR) to qualified new borrowers but have the flexibility to fund up to $5M to established borrowers (via either debt and/or equity).
Do you invest in companies that are not existing borrowers?
Currently, River SaaS Capital provides equity to only established borrowers.