The Power of Non-Dilutive Capital

There’s delicate dance for early-stage startups when raising capital. Getting approved for most forms of debt capital, e.g., business loans, is hard, since they often struggle to demonstrate the primary source of repayment – cash flow. That is why most startups go the route of looking for investors.

There is a path where revenue-generating startups can obtain a form of debt capital. It is called non-dilutive capital.

What is non-dilutive capital?

Non-dilutive capital is technically any form of capital that doesn’t require a business to give up any equity or ownership. With non-dilutive capital, the business shares a portion of the revenue they earn.

If you watch Shark Tank, you can hear “Mr. Wonderful” Kevin O’Leary offers startups money that pays in the form of royalties for every sale of their product or service. Which companies are willing to use non-dilutive capital?

What industries tend to use non-dilutive capital?

Non-dilutive capital is often used within the Software-as-a-Service (SaaS) industry. SaaS companies generally have established monthly recurring revenue (MRR) that they can count on. Take products such as Hubspot, for example. Their starter package costs $45 per month. If they have 1,000 people on that plan, then Hubspot knows they will generate $45,000 in monthly revenue. Of course, you must consider churn (the percentage or number of users Hubspot loses per month) and new customer acquisition.

Other industries have consistent recurring revenue as well. Examples include paid newsletters, influencers, and the revenue they generate per month on sites such as TikTok, Instagram, and Youtube.  Leasing, Asset Management, Health Services, and so many other industries are generating consistent, stable revenues. Even professional services firms, such as attorneys, accountants, and financial advisors, have consistent monthly recurring revenue.

Who offers non-dilutive capital?

Companies in the “Revenue Based Financing” world have become popular sources of non-dilutive capital. The challenge is that what they offer can be very, very expensive. Sometimes as high as 30+% APR (annual percentage rate).  They get away with this since they take as much as 20% of a company’s daily revenues (if you can believe it!), so that the financing is repaid on average in 4-5 months. Plus, many non-dilutive companies only focus on SaaS startups and exclude others.

A Revolutionary New Platform for Raising Non-Dilutive Capital Through Revenue Sharing

Revtap is flexible revenue sharing in return for a share of a company’s future revenues.  Non-dilutive capital that is far less expensive than the current options, still returns a high yield to investors, and is underwritten differently than current solutions.

If your company is looking for capital and want to explore the revolution in equity-free financing we’re providing, let’s talk!

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