Exclusive: Capchase Raises $80M Series B To Give Startups Alternatives To Venture

New York-based Capchase has closed an $80 million Series B as the company looks to expand its funding platform that offers founders nondilutive financing alternatives.

The new round was led by 01 Advisors, with participation from QED, Caffeinated Capital, Bling, Scifi, Thomvest Ventures, Tusk Venture Partners, Invesco and Gaingels. Founded in 2020, Capchase has raised more than $400 million to date in a mix of both equity and debt. The new round was completely made up of growth equity.

Capchase offers a variety of tools on its platforms that give founders nondilutive financing tools to fund their startup. Its main product—Capchase Grow—enables recurring-revenue companies to access future capital upfront. The loan is based on a company’s annual recurring revenue minus what is typically a 5 percent to 10 percent discount. Since launch, Capchase has worked with nearly 3,000 companies in the U.S. and Europe—making over $2 billion in funding available—and watched its ARR increase 2,300 percent last year.

“We did this because we wanted to be well financed,” said Miguel Fernandez, co-founder and CEO. “We want to build a full platform for founders.”

A changing market

Fernandez said he sees a significant role for Capchase to play as public markets have been hit hard by inflation concerns and global events, and there have been rumblings that private markets are also cutting valuations. 

“Even though we see companies that are still growing, their cost of equity is getting higher,” he said. “We are seeing more companies that want to combine some equity financing with alternative financing” to avoid dilution at lower valuations.

In the past year, Capchase has added to its product offerings to give founders more financing options—including a buy now, pay later solution for businesses and a high-yield account that pays a return on companies’ idle cash, like venture capital they may have raised.

Fernandez said more is likely to come, as the company continues to build out its data and automation technologies.

“We can predict what will happen to a company better than the founder,” he said.

Bradley Tusk, CEO and co-founder of Tusk Venture Partners, said his firm has been following the alternative finance space for the past few months. He said he was attracted to Capchase because of the company’s careful approach to regulatory risk and tremendous growth.

“We were blown away by Capchase’s ability to grow so quickly yet efficiently,” Tusk said. “In a few short months, they established a wedge in the revenue financing market and we’re bullish that they will be able to offer even more competitive offerings to their customers as they scale.”

Along with expanding the company’s platform, Fernandez said the 110-person company also will continue to look at potential partnerships with more traditional banks that have traditionally been slow to lend to SaaS software companies due to their different metrics.

The alternative financing sector has grown in recent years. Miami-based Pipe—which also helps finance companies based on their annual recurring revenue and was valued at $2 billion after its $250 million strategic equity investment in May—announced two weeks ago it acquired London-based Purely Capital, a media and entertainment financing company, and is launching its own media and entertainment division.

Fernandez said Capchase differentiates from others like Pipe in that it stays solidly in the SaaS software vertical, although some customers also have hardware and other services. The company is unlikely to expand into new verticals, especially with the opportunity he sees ahead.

“We see a massive business that can go public,” he said of Capchase.

Illustration: Li-Anne Dias.

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