What is non-dilutive financing?
Non-dilutive capital is financing that doesn’t require you to give up equity in your business. Pre-revenue startups may find that Venture Capital is the most applicable form of funding, to support their growth. However for startups with some recurring revenue and a trading history, there are a growing number of options, alternatives, and complements to VC available.
This guide will focus on two common forms of non-dilutive financing used by startups:
Revenue-based financing: capital that is provided in exchange for a certain percentage of the company’s future revenues. With most providers, you will need $500,000+ of predictable ARR, as well as several months of runway and trading history in order to qualify. You can access this type of financing any time (you do not have to be raising from VCs), based on your business fundamentals. If you qualify, revenue-based financing is generally the quickest to secure, with decisions made in days.
Venture debt: a type of loan that is designed specifically for early-stage, high-growth companies with venture capital backing. Loan sizes vary, depending on the amount and quality of venture capital raised to date, the scale of the business and purpose for which debt is being raised. Venture debt is typically used to augment an equity round, and is most likely to be an option for you once you have commitment from some reputable investors.
Who is non-dilutive financing for?
Venture debt and revenue-based financing can be good options if you want to:
Limit the amount of equity that you are giving up, as part of a fundraising round (or pad out your round);
You’re looking for flexible capital to support growth (e.g. for revenue generating activities like hiring, sales, marketing, or product development), and get yourself in the best possible position for a subsequent round.
While these options are designed to be more startup friendly than traditional business loans, you will need to meet certain criteria to qualify:
Significant ARR ($500K+), several months of trading history, several months of runway and/or the participation of reputable investors in your upcoming round (relevant for venture debt). You will find that many non-dilutive options are only available when you are seeking capital from a position of growth and financial strength.
Revenue-based financing is generally limited to companies in high-growth, high-margin sectors such as SaaS.
Non-dilutive financing functions like a loan, and will have to be repaid at agreed upon terms, with interest.
Who are some of the providers to be aware of?
Revenue-based financing
About: A full year of recurring revenue in your bank account, on day one. What would it mean to your company if all of your customers paid in full, upfront for an annual SaaS license? This isn't a hypothetical. Capchase provides an accelerated cash flow solution for SaaSCos who are looking to scale on the back of revenue, not dilution. With the ability to pre-fund a year's worth of MRR, you no longer have to offer substantial discounts to entice customers to pay upfront. Simply connect to our platform and receive an ongoing funding proposal within minutes that scales as you scale. No hidden fees, arbitrary volume caps or minimum contracts; just cash flow on-demand.
Eligibility: At least $500,000 of ARR, 3 months of runway and 6 months of revenue history. Available in the US, Canada, UK, Germany, Spain, Belgium, the Netherlands, Luxembourg, Sweden, Finland, Denmark.
Alchemist Offer: for SaaS companies, pre-fund up to 12 months of future MRR tied to monthly, quarterly, or semi-annual subscription contracts. Alchemist founders get 10% off Capchase fees. Link to offering summary here: https://drive.google.com/file/d/1n9HIk9vbFoFmd1AqFikc6LNKMw3UWdww/view?usp=sharing
About: Lighter Capital is the leader in founder-friendly financing. Our unmatched combination of up to $4 million in non-dilutive financing, professional networking resources, product discounts, and capital partner connections have helped more than 500+ US, Canadian and Australian startups succeed on their terms. Founders find our application process easy and prefer how our financing features no hidden fees, equity, warrants, or covenant requirements. We’ve already financed $450M+ in startups. Some use our financing to time venture capital rounds, and some companies use financing as an alternative. Please see www.LighterCapital.com for lots of resources about financing alternatives.
Eligibility: For technology and SaaS businesses with at least $200,000 of ARR, based out of the US, Canada and Australia.
Alchemist Offer: Alchemist companies are eligible for a discount. Contact Anne Gilbert <agilbert@lightercapital.com> for more information.
About: Uncapped provide no-security and no-equity investments from £100k - £10 million to startups. They charge fees from 0.5%+ per month on the capital provided and get repaid through a revenue share. 40% of Uncapped’s portfolio is venture-backed, and their VC partnership ecosystem includes 300 investors.
Eligibility: For Ecommerce, Subscription, D2C, Mobile app, or SaaS businesses, with at least $1M+ annual revenues. Available for businesses based in the US, UK and major European markets. Startups need to have 6-9+ months of runway, to be eligible. Uncapped have a strong preference for businesses with positive unit economics. Typical loan terms range from 3-24 months (up to 12 months is the average).
Alchemist Offer: To get in touch with Uncapped, please contact Leonardo Lucatorto (leonardo@weareuncapped.com).
About: Founderpath helps SaaS founders scale and keep equity by giving them non-dilutive capital in under 24 hours. Founders keep their equity and pay us back over 24-48 months. 6,500 other B2B SaaS founders use our free tools and engage in our community. $80m deployed to 160 founders as of Q4 2022.
Eligibility: Companies approved by Founderpath generally have between $1M to $5M in ARR.
Alchemist Offer: Non Alchemist members pay platform fees of $12k/year to use our analytics and reporting tools. As an Alchemist company, you get this free. In addition, you'll get our best terms on capital including 24 month payback periods and our lowest discount rates. Check out the Perks Directory or contact Chris Saum (chris@founderpath.com)
About: Novel Capital helps founders access non-dilutive capital, via an on-demand platform and based on their recurring revenue. To date, they have deployed $50M to 100+ companies.
Eligibility: Novel funds US B2B SaaS and services companies with predictable revenue. Companies must have $350K+ in annual revenue, and 10% YoY growth. If approved, founders can access $100K-$5M in capital, or up to 40% of their TTM. Repayment is over 24 months, starting lower in year 1 and scaling in year 2 as the company grows.
Alchemist Offer: To get in touch with Novel, please contact Yoav Snir (yoav.snir@novelcapital.com).
Venture Debt
About: Brex Venture Debt is designed for early-stage, venture-backed startups who want funding to accelerate their growth, extend their runway and preserve equity.
Eligibility: You should have at least 6+ months of net cash runway and $1M+ of ARR. Brex looks for positive unit economics and stable gross margins (50%+), as well as high growth rates (50%+ YOY) and retention metrics (100%+ NRR).
Contact: Reach out to Michael Morgenstern (mmorgenstern@brex.com), and mention you are an Alchemist company!
About: Working side-by-side with seasoned lenders, Mercury is committed to offering competitive, founder-friendly solutions that help companies scale with confidence. Their average deal size for Venture Debt is up to $5M.
Eligibility: You should have 12-18 months of runway, be HQ-d and operating in the US. You’ll also need to have raised at least $5M in the last 12 months, from institutional VCs.
Contact: Reach out to Anand Deshpande (anand@mercury.com), and mention you are an Alchemist company!
Other
You can find a list of further non-dilutive financing providers, across regions, here: https://app.dealroom.co/lists/19384
Feedback
If you have questions about eligibility, would like an introduction to a specific provider, or would like Alchemist to negotiate a perk (where none is listed in the Perks Directory) please contact katinka@alchemistaccelerator.com.
Please do also let us know if any of the information in this guide appears out of date. New providers and categories will be continuously added.