Questions we get asked frequently.
Why is Revenue-Based Finance gaining ground in Saas and eCommerce?
Revenue-Based Financing is a proven concept that has been around for hundreds of years and combines advantages of Venture Capital and bank financing. The Saas and eCommerce business models are maturing and with that comes more scrutiny for the cost and efficiency of the use of capital.
Why is Capital Mills offering Revenue-Based Financing?
We typically add the most value to emerging Saas companies that enter the scale-up phase. Since this stage requires pivoting your sales and marketing models, flexibility in capital deployment is of the utmost importance. With RBF we can offer the most flexible and cost efficient growth capital, for as long as needed. With RBF you can keep the choice open between larger VC rounds and profitable growth for as long as possible.
How much funding can I get?
We offer tickets from € 100K to € 2M per round. A rough estimate is that you can easily qualify for RBF up to 4 times your MRR. More is dependent on several company specific factors. We can also provide funding through receivables funding. And, don't forget - we also do equity tickets.
What does it cost if I just need to finance receivables or marketing spend?
We can give you a quote based on an analysis of your bank accounts and marketing metrics. A fixed fee starts at 6%.
What does Revenue-Based Financing cost?
For the repayment, you pay a percentage of your cash revenue up to a so called Repayment Cap. A fixed fee to be paid back during a period of up to 5 years, The cost of this capital would amount to app. 12% annually. More if you grow faster (we are both happy), less if your growth is lagging (we share the burden). Is your balance sheet strong? The cost can be lower. Do you have longer term contracts with your customers? The cost can be lower. Positive unit economics? The cost can be lower. And vice versa. If Revenue-Based Financing becomes Venture Capital, the cost will be higher. Don't get mislead if you see percentages of 6% as a flat fee on the internet. Usually you pay back in substantially less than 12 months, which means this will lead to double digit yearly percentages
Why is diluting on an equity investment bad?
It is not always bad but it can be way more expensive than a RBF because you have to give away a big shunck of shares that might be worth 5 or 10 times current price in the future
What kind of support does Capital Mills offer?
Capital Mills comes from an entrepreneurial background (mostly in software). So our natural instinct is to help you with all the hard things entrepreneurs face. But you are on the frontline. We are not. And we have learned that we can help you best by working from metrics. And as a bonus, we have our extensive network of investors with sometimes invaluable contacts or deep technical insights. We schedule monthly calls to help just as we would do for equity investments.
Does Revenue-Based Financing limit my access to Venture Capital?
No. On the contrary. It is non-dilutive capital, so for existing investors it means the pie does not need to be shared with more parties. Future investors see cap tables with less early stage investors, which they tend to like. Revenue-Based Financing has nothing to do with valuation of your company, which can be helpful.
I can get a 10M series A at a high valuation, that will get me in the news and make me a millionaire. Why isn't that good?
It might be good. You never know. 1 in 100 will be extremely succesful. Maybe that is you. But you are a virtual millionaire and the stakes get very high. It is extremely difficult to put a large investment to work. So we always say that you should only take up a large round if you are confident that it is the best thing to do. You will see it when the time is there. We also do series A but sometimes RBF is just the better option.
I can get a convertible loan from a state sponsored investor. What's wrong with that?
Not too much, as long as you realize that a convertible loan will get you an extra shareholder later on and will limit your financing options for the future.
A bank loan is a lot cheaper. Should I take that?
n general: yes. We are happy to build on top of what you can get from a bank. Especially when interests rates are as low as they are right now this can be an attractive path.