In this expert interview, Vik Thapar of Cypress Growth Capital explains revenue-based financing (RBF) and how it can be very useful for practical SaaS founders. In the last 10 years, Vik and the Cypress team have funded over 50 SaaS and tech-enabled services businesses that have steady recurring revenues and predictable customer acquisition approaches.
Revenue-based financing is a form of non-dilutive funding that is paid back as a fixed percentage of cash receipts until the investment is paid off.
Unlike raising funding from VC or other equity investors, founders with $3M-$10M ARR can use RBF as an efficient option to accelerate growth and increase the value of their companies without losing control or diluting their equity.
Royalty-Based Funding Topics Discussed on This Podcast
- 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 has happened in the royalty-based financing industry in the last 10 years?
- What’s the typical process and timeline for a founder to receive funding and start paying it back?
Vik Thapar on Capital Strategy for SaaS Founders:
“I think capital strategy is very important for an entrepreneur to know really well. If you do not raise money in in a way that will make sense for you in the long run, it can cause a company to get stuck. SaaS entrepreneurs were taught to raise a seed round, then raise Series A, then Series B, and so on.
“Most of those entrepreneurs who raised significant equity but really didn’t grow into it are now unfortunately stuck. They may not have understood capital strategy intimately.”
“Take the time to learn all the options and understand what could potentially happen in a good scenario and a bad scenario. Look at all the outcomes and all the different ways of funding yourself and determine what your end outcome could be. You might take a different approach and raise less equity.”
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