Founders Can Keep Their Optionality with Royalty-Based Funding

Optionality is one of the most important words that practical SaaS founders will ever possess.

It means you have all of your options open AND the freedom to choose what works for you.

When you stay off big funding drugs and grow a profitable $3M-$5M ARR software business, you have lots of options. All of them in fact.

You can keep running your company for growth or run it for profits. You can sell your company, take VC funding, or even take a partial buyout.

Your optionality is now one of your most precious superpowers.

On the podcast this week, it’s an expert interview with Vik Thapar of Cypress Growth Capital.

Vik explains their flavor of revenue-based financing (RBF) and how it can be useful for practical SaaS founders who want to efficiently accelerate growth and preserve their optionality a little longer.

Revenue-based financing for SaaS companies is a form of non-dilutive funding that is paid back as a fixed percentage of cash receipts until the investment is paid off. It’s debt-like, you’re not selling equity here.

Vik answers common questions about royalty-based financing:

  •  What is royalty-based financing and how is it different than other non-dilutive funding options like venture debt or equity funding from VCs?
  • When is royalty-based financing useful for practical founders by company size and capital needs?
  • When doesn’t royalty-based financing make sense for founders?
  • What time frame is typical for founders to use funding to grow and then exit at a much higher price?
  • What’s the typical process and timeline for a founder to receive funding and start paying it back?
  • What has happened in the royalty-based financing industry in the last 10 years?

I’m not recommending RBF and it’s not for every SaaS company, but I have seen it be very useful for some practical founders, including friends and several founders on my podcast.

Check out this expert interview with Vik Thapar on the Practical Founders Podcast.


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