Revenue-Based Financing with Miguel Fernández of Capchase

How are experienced founders raising funds? What are the best options for financing based on the stage of the company? How did fundraising change in the last few years?

In this episode of the SaaS Open Mic, I speak with Miguel Fernández, the CEO and co-founder of Capchase. Capchase has raised almost a billion dollars to help SaaS companies grow faster with capital, insights, and tools. 

We speak about current drivers and tendencies in funding and fundraising, revenue-based financing, and the metrics that distinguish the fastest-growing companies.

Optimizing for less dilution

At a previous company, Miguel and his team faced challenges around payment terms. The team would often agree to flexible payments to increase conversion, but they needed the cash up front, to recover their CAC.

Eventually, we incentivized customers to pay upfront by giving them large discounts. That would affect our average contract value, it would affect our growth rates, ARR, and our valuation. It was a pain that we just thought we need to suffer.

Nowadays, founders are looking to avoid big discounts or selling big chunks of the company to investors.

Second, third, fourth time founders are optimizing for less dilution. They know the playbook of how to grow a company, and they know that there are many ways in which you can grow the company at the same speed without selling so much of the company along the way. 

Now, Miguel and the Capchase team are on a mission to help SaaS companies grow faster. 

Revenue-based financing

Revenue-based financing is a form of financing that provides capital upfront against monthly or annual recurring revenue (MRR or ARR).

[With revenue-based financing] you can really plan ahead. You’re going to know exactly how much money you’re gonna be paying back and how much money you can draw to continue to invest. 

The metrics that distinguish the fastest-growing companies

Miguel shares some of his insights after working with thousands of early-stage, high-growth SaaS startups.

The fastest growing companies spend 35-50% of their top-line growth

What we’ve seen in over thousands of companies is that the best and fastest growing companies, the ones that last the longest, are the ones that spend between 35 to 50% of the top line growth. If they have their unit economics figured out, that spend actually returns many more dollars down the line in the form of ARR. 

The best companies have Net retention of over 100%. 

Next, Miguel highlights that the best companies focus as much on retention as on growth. 

The efforts focused on retention, get larger and larger over time. The best companies have an a net retention over 100%, that’s no surprise to anybody.

Adapting burn multiples is key 

Burn multiples are measured by taking your burn and dividing it by ARR growth over a certain period of time. The companies that have reacted the quickest, in the last four, or six months in terms of adapting burn multiples, are doing much better now.

As valuation multiples have decreased over the last six months, the companies that are able to reduce their burn multiples, that means that they have a lot more time to grow into a revenue figure, that even at a lower valuation multiple would mean an upper bound for those companies. 

On this episode of the SaaS Open Mic:

  • How Capchase got started
  • The different options for raising capital
  • Drivers and tendencies in funding and fundraising
  • Revenue-based financing 
  • The metrics that distinguish the fastest-growing companies

Bianca Wilk

Senior Manager, Content and Community & Host of SaaS Open Mic

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