Are you in search of a financing solution that exceeds the limitations of traditional bridge financing options? Look no further...
Are you in search of a financing solution that exceeds the limitations of traditional bridge financing options? Look no further! Levenue's extension financing option could be the ideal answer to meet your additional capital needs.
1. Understanding bridge financing: a brief overview
Bridge financing is a popular choice among startups to address short-term cash flow and working capital challenges efficiently. Its quick availability makes it an appealing option. Startups commonly utilize bridge financing to cover daily operational expenses and sustain their growth. They allocate these funds towards activities such as sales and marketing or product development.
Typically, bridge financing provides immediate cash while the borrower works towards securing long-term funding, such as equity rounds. Various arrangements exist for bridge financing, and Levenue's revenue-based financing presents an innovative and promising option for startups in need of funding.
2. The usual bridge financing solutions
Bridge financing options vary depending on the available alternatives and the company's situation: stable companies have more options than the ones facing challenges.
There are several current bridge financing options:
- A common choice is a bridge loan, which entails securing a short-term loan typically lasting between 6 to 12 months. It offers temporary assistance to a company until it secures longer-term funding, like an equity round, or expects significant cash inflows from a finalized deal. However, it's important to be cautious because bridge loans often come with high-interest rates that can make financial challenges worse.
- In cases where companies prefer to avoid debt with high-interest rates, they might explore equity bridge financing provided by venture capital firms. This option allows the company to receive capital until it can raise a larger funding round.
- IPO bridge financing is available for companies preparing for their initial public offering. Investment banks offer this type of bridge financing to cover expenses associated with the IPO process.
3. Transitioning from traditional bridge financing to Levenue's extension financing option
Levenue is the biggest European exchange for recurring revenue-based financing opportunities. As a marketplace, Levenue connects companies with recurring revenues (like subscription-based or SaaS businesses) to. It offers growth businesses in 11 European countries the chance to exchange their future recurring revenues for an upfront injection of capital, without any dilution.
Levenue stands out as an excellent bridge financing solution for several reasons:
- Revenue-based Financing: Levenue provides companies with access to additional capital, typically between 30% and 45% of their ARR based on their revenue streams. This innovative approach allows businesses with recurring revenue models to trade their future revenue for upfront capital.
- No collateral or additional dilution: Levenue addresses the same financing gaps as bridge loans but without requiring collateral or requesting additional dilution. By leveraging future revenues as assets, it offers a highly competitive alternative to traditional bridge loans or equity bridge financing.
- Cost-competitive: The discounts offered through Levenue vary depending on the company's size and situation, typically ranging from 3% to 13%. These discounts remain stable throughout the 12-month contract period. There are no hidden fees or additional interest charges, only the pre-defined discount rate established at the beginning.
- Quick process: Financing through Levenue is fast, taking only a few days to complete. The process involves providing the necessary data, verifying eligibility, determining the fundable amount, and attracting bids and investments from institutional investors.
Levenue's revenue-based financing solution offers a fast, cost-competitive, and flexible option, making it highly attractive for businesses seeking bridge financing.
4. In what scenarios would Levenue extension financing be beneficial?
Understanding when and how to utilize bridge financing effectively is crucial to maximizing its benefits. Here, we will explore two scenarios in which Levenue extension financing proves to be the most suitable option.
A. Between two significant investments/rounds
Startups commonly turn to bridge financing options between two major investment rounds. For example, a company may require additional working capital to extend its runway, support day-to-day operations, and boost growth prior to a new equity round.
This becomes particularly valuable in those recent months, where equity rounds have become more stringent, lengthening the fundraising process. The time needed to raise equity varies depending on the round, but the following average metrics can serve as a reference:
- An average of 22 months for a startup to secure a Series A [link to encyclopedia] round after a seed
- An average of 24 months to secure a Series B round after a Serie A
- An average of 27 months between Series B and C
Bridge financing can be valuable between each of these rounds.
Case study at Levenue: In October 2022, a European Foodtech startup found itself in need of bridge financing. They had completed a seed round in late 2021, raising over €2 million, and anticipated a Series A round in 2023. With an ARR of €2 million and a growth rate of 25%, they had an 8-month runway. A venture capitalist recommended Levenue as a solution to extend their runway, boost growth, and increase their investment. The startup secured €700,000 in funding through Levenue. They took the opportunity to shift their business model to exclusively offer monthly plans, which proved more profitable in terms of acquisition cost and had no impact on the churn rate. Thanks to Levenue's financing, they continued to receive upfront the annual value of subscriptions.
B. During an investment round
When raising equity, the entrepreneur must be psychologically prepared for his marathon to last at least 6 to 9 months (preparation, road show, negotiation and finalization). During this critical period, Levenue's revenue-based financing option presents a valuable opportunity to secure additional capital. This enables businesses to sustain their growth trajectory, meet daily expenses, and stay focused on securing the next round of funding.
Case study: In September 2022, a European startup started its Series A funding round and decided to get funded through Levenue from the very beginning of the funding process. They needed capital to cover expenses related to the round and fuel their daily operations, with a particular focus on marketing and sales efforts. They obtained €650,000 upfront through the Levenue platform and successfully finalized their Series A round in March 2023.
5. Do VCs like companies that utilize RBF and Levenue?
Absolutely! Levenue can be seen as a complement to equity financing.
Of course, Levenue offers an alternative for bootstrapped companies but also a complementary solution for companies already engaged in fundraising or other financing options. Levenue financing is non-dilutive and is not a debt so it can be used in complement to, respectively equity and loans.
Levenue has partnered with VCs in over 11 countries across Europe (countries where Levenue operates). VCs use Levenue in various ways: supporting their portfolio founders to boost growth before a new funding round, recommending Levenue to non-portfolio businesses that don't align with VC eligibility criteria, and using Levenue's algorithm to enhance their due diligence during rounds.
Levenue's revenue-based financing (RBF) option is a suitable choice for companies at various stages, ranging from seed to Series C rounds, where it is commonly utilized alongside equity financing. Levenue has no maximum financing threshold as it facilitates connections between companies and investors' capital. Therefore, Levenue's RBF option proves to be a well-suited solution for companies throughout the seed to Series C stages.
Levenue's non-dilutive financing is gaining popularity among founders and VCs as a competitive alternative for bridge financing. Since its founding in 2021, Levenue has successfully financed over 250 companies throughout Europe, offering entrepreneurs a more competitive alternative to traditional financing that does not require collateral, debt, or dilution of shares. Between two large investments or rounds, this option not only helps entrepreneurs finance their operations but also offers advantages to investors through the Levenue platform (buy-sides). It presents an opportunity to diversify investment portfolios and enhance profitability by investing in qualitative and less risky companies supported by other investors, such as VCs.