Revenue-based financing is on the rise, at least according to Lighter Capital, a firm that doles out entrepreneur-friendly debt capital.
What exactly is RBF you ask? It’s a relatively new form of funding for tech companies that are posting monthly recurring revenue. Here’s how Lighter Capital, which completed 500 RBF deals in 2018, explains it: “It’s an alternative funding model that mixes some aspects of debt and equity. Most RBF is technically structured as a loan. However, RBF investors’ returns are tied directly to the startup’s performance, which is more like equity.”
What’s the appeal? As I said, RBFs are essentially dressed up debt rounds. Founders who opt for RBFs as opposed to venture capital deals hold on to all their equity and they don’t get stuck on the VC hamster wheel, the process in which you are forced to continually accept VC while losing more … Read the rest