Debt So Hot Right Now, CRUNCH time, Software Buyer's Remorse

Happy Wednesday,

Welcome back to another edition of the Bigfoot Bi-Weekly Roundup.

This week I’m sharing a bit on:

• A Spin on Debt
• Series A (and beyond) being really hard
• Software Sellers Beware (of software buyers)

Announcement: Debt is the New Equity!

I ran across a TechCrunch article announcing a company that recently raised $50M in debt. In 15 years of exposure to TechCrunch, I’m not sure I’ve ever seen a debt raise in a headline, so I clicked through. We’re finally having our moment!

Turns out it’s convertible debt. So, we now have equity raises being framed as debt financing, talk about a pendulum swing! I get it convertible debt is technically debt until it converts, but come on.

From the CEO:

This debt was provided by the same firm that did their (1st) Series A. Talk about avoiding a down round...wonder what the cap is.

Also, I’m not sure how the CEO’s statement of having run the company of off-debt financing for the past 3 years jives with that $70M equity raise 17 months ago.

To be clear, I do not know this company and have nothing against them. The messaging just makes me laugh. Here’s another thing that always makes me laugh.

Series A and beyond CRUNCH (as seen on VC X)

I view this to be a solid set of opinions/market intel from long-time active seed/A SaaS investors. That said, from what I’ve seen where I operate, the bar is not as universally high as this. Regardless, true Series As with new investors coming in remain very hard to come by, rightfully so.

Software Buyers Hate Buying Software?

As someone whose livelihood depends on the success of B2B software, I did a double take with this headline. And this is from no small dataset - 1,500 respondents from companies with $50M+ revenue across North America, Western Europe and APAC.

“Regret is a known issue with enterprise technology purchase decisions…The issue is significant enough that it raises the question of whether business to business (B2B) technology buyers have negative attitudes toward purchases by default.”

- Hank Barnes, Distinguished VP Analyst at Gartner [Amazing job title!]

The Distinguished Barnes added:

”Pessimism and regret continue to grow for enterprise technology buyers. This usually has little to do with the provider or the products themselves, but rather is driven by ineffective or dysfunctional behaviors within the buying team.”

Other observations the survey unearthed:

• Technology buyers’ negative attitudes are shaped by: 1) frustrating buying experiences, 2) poor communication and 3) an overwhelming number of options to consider.
• These issues create challenges when pursuing expansion opportunities, such as: 1) longer buying cycles and 2) conflicting objectives within the team.
• Technology buyers would prefer to have minimal interactions with sales teams. 95% of technology buyers indicated they would have preferred a fully digital/online experience for their expansion purchase.

2023 has been a year of SaaS shakeup and stalled pipelines, this survey provides more context as to why with the demand side having a hard time with their buying processes and decision-making and harboring some hate for salespeople.

About Bigfoot Capital

Bigfoot Capital offers growth-oriented loans for B2B software companies with $2M- $20M in revenue. We pride ourselves on partnering with companies and their stakeholders to provide a capital partnership that comes with stability and support.

If you operate or support a B2B software business and want to learn more about alternative capital options that preserve equity, get in touch with our team today.