“To best explain the FBR financing process, let`s use an example. Pied Piper Inc needs financing to accelerate the acquisition of its SaaS solution. GSD Capital lends $250,000 to Pied Piper and does not take any ownership or control of the transaction. The financing agreement describes the details of the repayment of the loan and sets a “ceiling” or a repayment point of the loan. For a period of 3 years, the amounts of the ceiling are generally between 0.4 and 0.6 times the amount of the credit. Every month, Pied Piper verifies its financial income and sends the agreed percentage to GSD. If the company is going through a difficult time, GSD shares the downward side. Stop monthly payments once the limit is reached and the loan repaid. In a situation where Pied Piper`s revenue growth is higher than expected, the anticipated discounts will be integrated into the structure, which will reduce the cost of capital. Liquidity Capital: Ron Daniel, co-founder and CEO, said: “Liquidity Capital offers growing technology companies a unique, non-regressive, unsecured funding alternative that allows them to double their growth and extend the track without giving up equity or guarantees. Our model is simple — we buy a portion of a startup`s unsecured future revenue with a small discount in advance. We can use capital within 14 days of requesting funding, and our agreements are free of collateral and have no hidden fees or agreements, with a founder-friendly model. » What is founders` income? Most business owners introduce income, other expenses dwindl, and what remains is a sum of money that founders can crush into one of three things: 1) founders` salaries 2) dividends3) profit reserves (which are maintained in the company, but can be converted at any time into #1 or #2) Traditionally, equity investors are only entitled to a percentage of dividends. But founders who own most of their business have the right to set arbitrary limits between salary, profit reserves and dividends.
This doesn`t make much sense and can turn into proxy battles over what a “fair” salary is if investors get a seat on the board, which allows salaries, etc. Instead, we decide to bundle everything into Founder Earnings, which represents the economic value that goes to the founders. SEAL investors will receive an agreed percentage of these, called “Shared Earnings”, which provides more clarity and guidance. Meanwhile, investors receive rent and a large portion. I say rent, not dividends, because their right is based on a legal agreement and not on equity. With 30% of the winnings until the return of course is reached, this corresponds to a full partner or more. But the most personal cost of SEAL capital for founders is the idea of “low but fair” founders` salaries. This term allows the SEAL investor to draw a line above which the founder`s salary is considered part of the founders` profits, i.e. added to the net income and is therefore subject to a percentage of common profit for the investor. Well, on the side of shared earnings agreements, these models may have been inspired by revenue-based investments, but they are very different. They focus more on early-stage start-ups, which have most likely been mistaken for steady revenue growth or profitability, but not enough revenue to offer a multiple (or wish).
RevTek Capital. Specialized in SAAS technology companies. You can borrow “Up to 1/3 of your company`s annualized turnover, usually up to 40% of the ARR”. What you need to qualify: “Business: Predictable Recurring Revenue; Revenue: $50,000 per month; gross margins: at least 50%; Profitability: not necessary. We believe there is a mis-direction between IRR-sensitive investors and founders, who are more sensitive to the total amount of money they have to return to investors in exchange for initial capital. . . .