India’s startup ecosystem is valued at $ 332.7 billion (May 2022). It houses 100 unicorns (companies valued at $1 billion or more).
Not surprisingly, India is the third-largest startup ecosystem in the world, in terms of unicorn capacity. Indeed, that’s a positive outlook for the industry.
Nevertheless, in this crowded industry, almost 95% of startups don’t qualify for venture capital. But that shouldn’t stop you from doing business. You can still get access to capital even if your startup hasn’t reached the capital raising stage yet.
Thankfully, the corporate finance sector has flourished with new capital raising opportunities. One such practice is Subscription Based Financing (SBF).
Subscription based financing allows companies those with recurring revenue business models like monthly or annual subscriptions) to raise funds, without diluting their stock, through a quick exchange of subscription revenue for cash.
It’s a given that SaaS and other subscription-based businesses need capital to expand into the market and acquire new customers. The SBF model can be an ideal solution for them with immense potential for business growth. On the other hand, equity dilution can prove costly at times, from an ownership perspective.
From an investor’s perspective, SBF ensures a predictable cash flow and recurring revenue maturities compared to a fixed income-yielding asset profile. Among the main reasons why SBF is gaining popularity around the world is the predictability and reliability of subscription-based revenue.
The subscription-based financing strategy allows businesses to obtain funding quickly by exchanging future recurring revenue streams for immediate cash. SBF is deemed the ideal choice for SaaS, EdTech, D2C, and other businesses that generate revenue through monthly, quarterly, or yearly subscription-based products and services.
When a business applies for SBF, the finance providers collect and analyze information such as:
They use sophisticated algorithms to combine these inputs and conjure a solid credit profile for the applicant company.
Startups can pay back their investors once their consumers begin making payments. As it stands, SBF resembles a contract that companies trade to raise money for immediate expenses for business expansion and/or aggressive customer acquisition drives.
But how do you get started with SBF? It begins with searching for platforms that offer such alternative financing solutions.
Once you find a reliable SBF platform, you can register your organization with the service provider.
Connect your accounting and invoicing software with the platform.
Your trading limit will be unlocked within 48 hours after your input data (details submitted during platform registration) is synced.
After learning the various aspects of the subscription-based financing model, you may ask, what’s in it for your organization. Whether you are a startup founder looking to raise capital or an investor seeking new investment opportunities, SBF comes with loads of advantages. Let us take a look at the top reasons why SBF might be ideal fundraising or investment option for you:
Recur Club is a subscription-based finance platform that allows businesses with recurring revenue to raise funds quickly without diluting their equity. The platform connects potentially high-growth subscription-based businesses with top financial institutions. Companies can get the capital they need in a non-dilutive manner, based only on the quality of their recurring revenue.
Recur Club started after its founders noticed that there are cash flow issues even in companies that have a consistent source of revenue in the form of subscriptions. That’s where Recur Club comes into action. The platform facilitates funding in exchange for the newly emerging asset class (subscription-based revenue model, which guarantees predictable returns).
Here is what the SBF fundraising process looks like on Recur Club:
Typically, startups have three financing options, each of them with its own set of challenges. To raise money in the equity category, the founders typically have to give up a large portion of their ownership share. The other two finance options, revenue-based finance, and venture loan have less favorable terms and conditions.
Furthermore, capital raising processes as a whole can often be time-consuming, which might divert companies’ attention away from their core business. Recur Club makes this process seamless. Businesses can now raise funding without diluting their stocks or exposing themselves to debt restrictions.
Recur Club evaluates a company’s revenue stream data and other pertinent information to offer them funding resources. The fund limit is set using AI and machine learning models, depending on the companies’ profitability. Following that, financial institutions that offer capital are connected with the fund-seeking company.
If a business receives $1000 as monthly subscription revenue ($12,000 per year), it can borrow approximately 90% of this amount in one go from any qualified financial institution. The payback period can be scheduled on a monthly basis or as soon as consumers pay for the fundraising company’s product subscriptions.
Here are the key features of Recur Club:
If you are a startup founder, you must always look for ways not to sell or dilute too much of your equity or take debts. Recur Club helps you do that. The SBF platform helps companies obtain funding without sacrificing control or equity stake by leveraging the power of their subscription-driven revenues.
On the other end, investors can access excellent risk-adjusted returns generated by a stable, lively, and rising market. Technically, customers of a subscription-based business are treated as the company’s capital. That’s what the new asset class is all about. Recur Club helps companies monetize this new asset class.
Conclusion
India is right now the melting pot of technology and innovation startups. The level of growth the country’s startup ecosystem is experiencing can be gauged from the fact that the number of recognized startups grew from 726 in 2016 to 65,861 as of March 2022.
Industry pundits claim that this is just the beginning. Similar growth will be seen in the future. And with more startups populating the space, competition to raise funds using traditional measures is getting stiffer.
Thankfully, SBF has emerged as one of the most viable and helpful funding solutions for founders and entrepreneurs to help them scale their firms, keeping the company debt-free (the holy grail of 21st-century business).
With Recur Club’s SBF options, your startup can achieve high growth in a much shorter timeframe without long-term commitments. That’s a win-win!
Related Categories: Financial Management Software | Asset Management Software | Loan Management Software | Stock Market Software
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