European investors continue to pour money into revenue-based debt startups, hoping to capitalise on the success of US-based newcomers like Pipe.
The latest to join the fray is Capchase, which has today raised a Series A round to grow its recurring-revenue financing platform.
The new funds, which total $125m, are a mix of equity and debt financing. The round was led by fintech specialist firm QED Investors (also investors in Klarna), with participation from earlier investors Bling Capital, ScifiVC and Caffeinated Capital.
The Spanish-US company allows SaaS companies to receive recurring revenues in the form of debt, using future revenues to finance growth and avoiding dilution through venture capital financing.
It will be up against the likes of Uncapped and Silicon Valley Bank, as well as Clearbanc which recently announced it was expanding into Europe.
“Future revenue presents a major opportunity when it comes to funding present growth. By recycling future funds, companies grow faster and do not need to rely on expensive equity rounds”, says Miguel Fernandez, the company’s cofounder and CEO. Fernandez and two other cofounders are Spanish; the fourth cofounder is Polish.
Since its founding last year, Capchase has grown quickly amid interest in alternatives to traditional debt and venture funding for startups. The startup currently has more than 400 companies on its platform and has issued more than $390m in financing.
Capchase was named one of Spain’s most undervalued startups by VCs in 2021.
A flurry of European fintechs are now providing alternative financing to startups.
This builds on the momentum in the US, where Pipe has built a trading platform for recurring revenue businesses and hit at $2bn valuation in May.
From banks to bitcoin, get all the gossip and analysis in your inbox.
Several European firms have mimicked Pipe’s model, including Germany's re:cap, Bridg and Rail. Newcomers like Lionshare are also in the works in the UK.
However, Capchase has chosen not to pursue the marketplace model (which connects investors with startups), and is instead lending off its own balance sheet.
“Founders are very cautious about sharing their data and in a marketplace model, that data is shared with all the interested parties and our customers didn’t want that”, Fernandez explains.
“Having the ability to make decisions without having to wait for a market means that we can move much quicker, provide much more certainty to our customers and be more flexible with new products and special situations.”
Fernandez says that Capchase aims to be more attractive to traditional debt because it offers speed, flexibility and support in the form of a funding plan that can be adjusted with the company’s goals.
Companies can access funding in less than 24 hours, instead of the weeks it would take to tap capital from a bank, he says.
UK and Spain expansion
Capchase says it will use the new financing to expand its business in the UK and Spain, and expand into more European countries in the coming months.
“As the UK is the financing hub of Europe, as well as the largest European market for recurring revenue businesses, it was the natural first choice for us to put down our flag. The UK will also provide an ideal entry point for us to quickly expand into other European countries”, says Henrik Grim, general manager of Europe at Capchase.