Revenue-based financing: A fresh approach to startup fundraising

A fresh approach to startup fundraising is revenue-based financing.

A few years ago, there were just two alternatives available to founders when launching a business: either bootstrap the business themselves or seek #VC funding, which they would largely utilize to drive growth. Venture debt began to gain popularity later. Even though it is non-dilutive, its drawbacks are comparable to those of VC equity: It takes time to obtain, requires warrants, isn't very flexible, and isn't available to all #startups.

However, founders now have more options at their disposal than in previous years. #Nondilutive finance is now available to the majority of businesses, and financing for specialized purposes has entered the market.

Although venture capital is still the most common source of funding for businesses, entrepreneurs should utilize all of their available financing choices. employing the best possible mix of capital sources entails employing cheaper, short-term funding for immediate objectives and more expensive, long-term finance for endeavors with hazy future rewards.

How does revenue-based financing work?

Let's describe it as funding given in anticipation of future earnings.

So what makes revenue-based financing special? First of all, it raises quickly. Revenue-based financing can be set up in days or even hours, as opposed to the months-long procedure often associated with traditional types of stock or debt #funding. It is also flexible in that you can opt to take the money in installments and use it over time rather than having to withdraw the entire amount at once.

Additionally scaling with your increased #credit availability is revenue-based financing. Typically, there is just one straightforward charge with set monthly instalments.

How should startups adapt their fundraising strategy?

Startups should consider matching short- and long-term activities with short- and long-term sources of finances in order to maximize #fundraising using various sources of funding. Shorter-term in nature, the typical duration for revenue-based financing is between 12 and 24 months. With a usual tenure of two to four years, venture capital and venture debt are longer-term funding sources.

Short-term tasks for a startup could include marketing, sales, implementation, and related expenses. A startup can forecast how much revenue it will produce if it invests a particular amount in growth if it understands its economics, CAC, and LTV. Startups should use revenue-based financing to fund initiatives that will bear fruit soon because the return on these activities may be larger than the cost of the financing.

A perfect example and best newcomer to the market is Assetize , offering revenue based financing to the #SaaS sector. Check out www.assetize.today for more info and understand the perks in fundraising strategy of the future.