Technological and financial developments are introducing a new diversity of financing methods for companies, enabling them to have more flexible, faster and more inclusive solutions.
Fundraising is giving way to new, more practical, more instant and more inclusive funding, such as revenue-based funding.
Fundraising is no longer the Eldorado of companies
Fundraising isn’t as popular as it once was. Faced with the uncertain macroeconomic environment, rising commodity prices and inflation, investors have become more cautious. Venture capital funds no longer invest that much and, when they do, it is only after hard, cautious and useless selections.
In 2022, “Growth at all costs” is no longer the investment norm. The mega rounds have given way to more reasoned investments, in companies whose economic model is more stable, safer.
In this unprecedented context, inequalities in access to finance have increased. The studies of the founders, the number of partners and gender have become the most important variables that condition the fundraising of a startup in France, in addition to the innovative nature of the project (see table). Therefore, according to Dr. Pierre-Nicolas Schwab for the research firm Into The Minds, companies founded by women represent only 7.96% of the amounts funded in Europe.
So, given the lack of equity in fundraising, what is the real sustainability of this method of financing? What if there were better alternatives?
Non-dilutive means a paradigm shift in companies’ access to credit
The new company is increasingly concerned about its shareholders and is turning to non-dilutive financing methods. Unlike fundraisers, these have the considerable advantage of allowing the entrepreneur to finance their business while keeping their participation intact.
There are also two opposing financing methods:
- The first, the bank loan, has many disadvantages: interest rates rise and access to credit also becomes increasingly limited. Even the steps and delays, from the constitution of the dossier to the final decision, are long and with no guarantee of success.
- The second, innovative, allows to obtain financing quickly thanks to mainly digital solutions. This new approach evaluates the company’s risks differently. The new financing methods, in fact, instead of analyzing only the historical capital and fiscal data, analyze the growth projections of companies’ revenues.
It is among these new financing methods that Revenue Based Financing emerges, an innovative and flexible solution, suitable for many companies.
Revenue-based financing: fast, flexible and more inclusive
The principle is simple. Enable companies to generate money in less than 48 hours, based on current and future revenues. The data is analyzed online, in a secure way, to grant loans in record time. In very concrete terms, the software integrates read-only with the various company tools (invoicing, accounting, bank current accounts) thanks to open banking. The startup thus has a 360 ° real-time view of the company’s financial health. Thanks to these technological innovations, data analysis is much faster and more objective. No more long weeks of waiting in the bank, 48 hours are enough.
Revenue-based financing is therefore a way of financing that is not only more accessible and faster, but also much more inclusive.
In just 6 months of activity we have found a real need for simplicity and transparency among entrepreneurs. Non-dilutive financing, like RBF, is a fair solution that stands at the antipodes of traditional financing solutions: the selection of companies eligible for financing takes place exclusively on objective criteria linked to the operational performance data of the company and its growth.
Emmanuelle Szerer, founder and CEO of Almé, testifies:
“We used the RBF to finance Almé on an ad hoc basis, in a context of research for major growth in a short period of time. At the time, no bank would have lent us! Financial by education, I perceive the non-dilutive financing model as a small revolution at the heart of a dusty banking system, historically highly regulated and restrictive for entrepreneurs: loans are long to obtain, practices sumptuous and loan criteria too rigid. We had neither the bandwidth nor the profile to establish demand for our pioneering ambitions of inclusive and responsible fashion. Today we are growing so fast that Almé has set itself the goal of reaching 6 million euros in annual turnover in three years, we have raised funds and continue to integrate RBF into the management of our business. “
This type of financing is a real revolution in this sector. 100% objective and transparent, revenue-based funding leaves no room for discrimination and thus becomes a credible and attractive alternative to fundraising.