Revenue-based financing is a relatively new market that has become an investment focus in Europe in the past 18-24 months.

It is a capital financing way for a business from providers receiving a fixed percentage of ongoing gross revenues, with payment increases and decreases based on business revenues, typically measured as either daily revenue or monthly revenue. Its initial form was finance factoring - when a company buys a debt or invoice (Account Receivable) from another company, usually under a form of invoice discounting (models can differ by market due to different legislation). This has evolved into financial product that's real-time aligned to the current revenues of a company.

Quick market considerations:

• revenue-based financing is a product serving an emerging Euro market of SAAS startups with PMF looking to grow aggressively.
• target customers are VC-backed startups - they've already been de-risked and have hefty marketing budgets to be complemented w/ RBF.
• it directly competes with banks selling cash advances against collaterals such as inventory (ecommerce) and factoring products (against accounts receivables).
• it is also an alternative way of financing to the equity-based money sellers such as VCs with an older pre-cursor product such as the venture debt.
• however, VC backing and RBF usually go hand-in-hand, with RBF using VC dealflow as a customer funnel
• there's a few comparable advantages between equity-based financing and revenue-based financing:

i) lower cost of capital, particularly compared to the standard minimum 30% IRR expected by the equity-based product vendors. The interest rates are comparable to the bank loans and are also aligned to the financial performance of the company - i.e. both parties benefit from revenue growth in the business; both parties suffer when revenue declines
ii) lower upfront processing fees - in the case of raising equity, the legal fees can be quite hefty.
iii) the interest payments are tax deductible in the income statement

• fast process, little paperwork and data-driven decisions are the main competitive advantages for RBF sellers getting new business.
• two business models:
  i) direct selling backed by a data/tech-based underwriting process 
  ii) subscription-based marketplace providing access to a portfolio of lenders ready to trade.
• global TAM: $42.34 Billion in 2027 at CAGR of 61.8% from 2020 to 2027

 

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VC-backed startup contenders in Europe

 

The UK (6)

• 365 Business Finance
• Liberis
• Outfund
• Uncapped
• TradeBridge
• Vitt

 

Germany (6)

• Banxware
• Lentvio
• re:cap
• Remagine
• Uplift1
• Tapline

 

  France (4)

• Finamatic
• Karmen
• Silvr
• Unlimitd

 

Spain (3)

• Capchase
• Novicap
• Ritmo

 

Sweden (2)

• Ark Capital
• Float Lending

 

Italy

• ViceVersa

 

Ireland

• Wayflyer

 

Netherlands

• Levenue

 

Poland

• Booste

 

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Selected investors backing revenue-based financing startups from Europe in the past 24 months

2 deals:

Force Over Mass Capital
QED Investors
Speedinvest

 

At least one deal:

UK

• Element Ventures
• Felix Capital
• Fuel Ventures
• Left Lane Capital
• Local Globe
• Seedcamp

 

Spain

• All Iron Ventures
• Inveready
• JME Ventures
• Samaipata Ventures
• Sabadell Venture Capital

 

Germany

• GFC
• High-Tech Gründerfonds
• Project A Ventures
• True Growth Capital
• VR Ventures

France

• Eurazeo
• Isai
• Otium Capital
• Serena
• XAnge

 

USA

• White Star Capital
• Fin VC

 

Switzerland

• Lakestar

 

Sweden

• Creandum

 

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Questions or comments? Let us know!