Capchase Doubles Down, Raises Fresh $280M To Provide Startups With Alternative To VC Funding

New York-based Capchase, a nondilutive capital provider, closed a new $280 million round of debt and equity — less than seven weeks after announcing a $125 million round.

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The round was led by specialty finance firm i80 Group — which also led a $60 million debt round in Capchase in January. Other investors in the round were not announced, but previous investors include QED Investors, Bling Capital, SciFi VC and Caffeinated Capital. Capchase has now raised nearly $470 million in a mix of debt and equity, according to Crunchbase data.

Capchase launched its platform late last year as an nondilutive alternative to venture funding for founders. The platform offers upfront capital to companies with recurring revenue.

The loan is based on a company’s annual recurring revenue minus what is typically a 5 percent to 10 percent discount. An example would be a company with $10,000 in monthly recurring revenue; Capchase may pay out $108,000 for the total $120,000 ARR in return.

The new funding will be used to help introduce the company’s new “buy now, pay later” feature, which allows companies to get money upfront for their largest expenses — such as payroll — and repay at a fixed rate in three-, six-, nine- or 12-month increments.

Miguel Fernandez, co-founder and CEO, said the market demand was enough for the company to decide to raise more equity and debt.

“Both traction and adoption are much faster than we had anticipated, and we also see larger companies tapping into this source of funding as the main complement for growth,” Fernandez said. “In this case, this round is partly nondilutive, increasing the amount of funds that can be drawn by customers and at more attractive rates.”

Capchase has helped finance more than 500 companies and is about to break the $600 million mark in capital made available to customers.

“Demand is higher than ever,” Fernandez added.

Alternative financing arms race

Capchase is not the only company in the emerging alternative finance space to see significant money roll in this year. Earlier this month, Toronto-based Clearco — formerly Clearbanc and a pioneer in the space — raised a new $215 million growth equity round led by SoftBank Vision Fund 2. In April, the company raised $100 million in equity and $250 million in debt that valued it at almost $2 billion.

In late March, Los Angeles-based Pipe raised a $250 million round at a $2 billion valuation, and the month before Austin-based Founderpath raised $10 million in debt.

Companies in the space, as well as investors, say the upswing in the alternative finance B2B market is similar to the B2C fintech explosion that has been going on for years — as both U.S. and European startups are looking for new ways to fund their companies without losing ownership stake.

Illustration: Li-Anne Dias.