Take a step back to reexamine your morning routine, and you’ll find that within hours of waking up you most likely interacted with a handful of subscription services ranging from music streaming, podcasts, fitness class, morning newsletters, etc. Once you enter work-mode, you’re even more reliant on professional subscription services. Even though these SaaS companies benefit from increased adoption of these services, smaller SaaS companies face challenges with cash-flow inhibiting growth since customers prefer to pay monthly or quarterly rather than agreeing to upfront annual contracts. Pipe addresses this challenge by helping SaaS companies receive the upfront, annual value of their booked monthly and quarterly subscriptions. In order to qualify, Pipe assesses potential customers’ (SaaS companies) key metrics by integrating its accounting, billing, and subscription management systems. Once accepted on the platform, Pipe’s marketplace connects these SaaS companies to vetted investors, who put up the equivalent of annual revenue by purchasing the revenue from these subscriptions, which they view as highly predictable, recurring revenue-generating assets, similar to fixed-income products. Pipe takes a small fee from the buy-side investors for handling these transactions.
LA TechWatch caught up with CEO and Founder Harry Hurst (repeat entrepreneur) to learn how Pipe’s platform can help growing SaaS companies avert dilutive equity capital and onerous debt through its marketplace for factoring. Launched in August 2019, Pipe has raised a total funding amount of $66M across three rounds which includes $50M in working capital. Hurst has prior experience leading companies; he founded the rental car company Skurt (which LA Techwatch profiled back in 2015). Skurt was acquired by Fair for $50M in 2018.
Who were your investors and how much did you raise?
Pipe raised an additional $10M as a Seed extension from Fin VC, KSD Capital, Tribe Capital, Uncorrelated Ventures, Lachy Groom, Anthemis, Craft Ventures, Fika Ventures, MaC Ventures, Naval Ravikant, WorkLife Ventures, Liquid2, and The Weekend Fund.
Tell us about the product or service Pipe offers.
Pipe is the new way for SaaS companies to fund their growth free of debt and dilution. Pipe has created the industry’s first SaaS subscription financing platform, where SaaS companies can sell their monthly or quarterly subscriptions and receive upfront capital. On the other side of the trading platform are vetted investors who buy the subscriptions, which they view as highly predictable, recurring revenue-generating assets, much like fixed-income products. Pipe’s platform creates a market between the two sides and handles all of the servicing.
What inspired the start of Pipe?
Pipe’s founding team, having already founded and sold a startup, had personal experience not only with raising equity capital but with the dilution of ownership that comes with it. We saw a huge opportunity to build a non-dilutive financing option specifically for SaaS companies.
How is Pipe different?
Pipe is an alternative to dilutive equity capital and expensive debt. Pipe is not a loan and not a lien on your business. Best of all, Pipe is instant – no lengthy and time-consuming application or approvals process.
What market are you targeting and how big is it?
Industry analysts estimate that the global SaaS market is valued at over $100B and growing, and the larger cloud services market is over $250B.
What’s your business model?
Pipe is the platform on which SaaS companies sell their highly valued assets – their subscriptions – to investors. Pipe acts as the originator and the servicer for the marketplace and takes a small fee from the buy-side investors for handling those transactions.
Who are your major competitors?
Pipe is the first to approach financing SaaS companies in this way and the first to build a trading platform for SaaS subscriptions.
What was the funding process like?
Pipe has been very fortunate to have incredibly supportive investors. It was relatively smooth for us.
What are the biggest challenges that you faced while raising capital?
As second-time founders, the toughest choice for us was who to partner with. Major investors in your company are with you for the long run, when you take on investment from a VC, you’re effectively getting married for 5-10 years.
What factors about your business led your investors to write the check?
Many of our investors are former founders themselves, and therefore understand how difficult financing growth is and appreciate the appeal of non-dilutive capital. Many investors have deep fintech or SaaS experience and they’ve been incredible advisors and supporters during Pipe’s early stages.
What are the milestones you plan to achieve in the next six months?
The most recent round of equity financing will be used to grow our business which includes building out the team, improving the product and experience, and expanding to new markets. The asset financing will be used to provide more liquidity on the trading platform so even more SaaS companies can use Pipe.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
If you’re a SaaS company, check out Pipe! If you’re not, there’s some great VC’s in LA – Fika Ventures and Upfront Ventures are two that come to mind.
There’s some great VC’s in LA – Fika Ventures and Upfront Ventures are two that come to mind.
Where do you see the company going now over the near term?
The focus is squarely on providing the most seamless experience for our customers. Our focus will remain on building the right product to deliver the best service.
Where is the best place in LA to watch the sunset?
Malibu.
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