Austin-based Founderpath, which helps finance SaaS companies, raised $10 million in debt as the company approaches approving $1 million in loans weekly.
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The new capital comes from other entrepreneurs like: Pat Condon, co-founder of Rackspace; David Hauser, co-founder of Grasshopper; Bill Boebel, co-founder of Webmail; and Clarity.fm founder, Dan Martell.
While the company is excited about the new fund, it is only the next step for the company, said founder Nathan Latka.
“This should last us four or five months,” he said, adding the company could announce another, larger fund at that time.
Founderpath helps SaaS companies increase cash flow without diluting ownership by offering loans based on their monthly recurring revenue and a SaaS credit score. Typically, founders can get 11 months of their monthly recurring revenue paid upfront, usually at the cost of one additional month of recurring revenue.
The company, founded in late 2019, has had 1,500 founders connect to its platform and hundreds have taken payouts, Latka said.
Looking for ways to increase cash on hand without raising large funding rounds that cause ownership dilution has become popular with SaaS companies. Founderpath competes with a handful of platforms looking to lend based on a company’s monthly, quarterly or annual recurring revenue, including Cambridge, Massachusetts-based Capchase and Los Angeles-based Pipe.
Rackspace’s Condon said this type of new tool for SaaS companies is just a case of finance starting to catch up with the market.
“There is no doubt that the explosion we’ve seen in high-quality SaaS companies over the last five years is only accelerating going forward,” he said. “The products SaaS companies have to finance their growth haven’t caught up yet, unfortunately.”
Only now are new and innovative funding methods emerging specifically tailored to the unique needs of fast-growing SaaS companies, Condon added.
“There will be several strong alternatives to traditional equity financing for SaaS companies in the coming years,” he said.
Illustration: Dom Guzman
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