Private Credit & Revenue-Based Financing

Revenue-Based Financing (RBF)

Pipe, Capchase, Clearco and investing in SMB revenue streams.

Investment Overview

Revenue-Based Financing (RBF) provides capital to startups and SMBs in exchange for 2-15% of monthly revenues until repayment cap reached (typically 1.3-2.5x). Unlike equity (no dilution) or debt (no fixed payments), RBF flexes with company performance—high revenue months mean higher payments, slow months mean lower payments. Leading platforms: Pipe ($5B+ deployed, marketplace model), Capchase ($1B+ advanced, SaaS focus), Clearco ($5B+ funded, e-commerce/marketing). Investor returns: 12-18% IRR from the repayment cap (e.g., invest $100K, receive $130K-$250K over 1-3 years). Suitable for companies with $500K+ ARR, predictable revenues, and aversion to equity dilution.

Market Context & Trends

RBF market grew from $1B (2018) to $10B+ annually (2024) as founders sought non-dilutive capital. Pipe pioneered trading platform for revenue streams (2020), raising $250M from investors. However, 2022 downturn hit hard: Clearco laid off 30% staff as e-commerce collapsed, Pipe acquired by Deckmatch after struggling to scale. Survivors (Capchase, Lighter Capital) focused on SaaS companies with predictable MRR (monthly recurring revenue). Default rates: 5-10% for e-commerce RBF (volatile), 2-5% for SaaS RBF (predictable). Key risk: If company revenues decline, payback period extends indefinitely.

How to Invest in Revenue-Based Financing (RBF)

Pipe Marketplace: Buy/sell revenue streams, 10-25% discounts to face value, 12-20% IRR target

Capchase Secondary: SaaS revenue contracts, 10-15% IRR target, $25K+ minimums, accredited investors

Clearco Portfolio: E-commerce marketing advances, 12-20% IRR target but higher defaults (8-10%)

Lighter Capital: SaaS revenue-based loans, $100K-$3M loan sizes, no direct investor access (institutional)

Flexible Capital Fund: RBF fund, $1M+ minimums, 15-20% IRR target, institutional/accredited only

Key Platforms & Access Points

Pipe (via Deckmatch): Trading platform for revenue streams, secondary market, 10-25% discounts

Capchase: $1B+ advanced to SaaS companies, secondary market for revenue contracts launching

Clearco: $5B+ deployed to e-commerce, focuses on marketing spend advances, 8-10% default rate

Lighter Capital: $450M+ deployed since 2010, SaaS focus, 15-18% net returns to capital partners

Uncapped: European RBF, €100M+ deployed, 2-5% monthly revenue share, 1.5-2x repayment cap

Key Investment Metrics

Revenue predictability: SaaS MRR (monthly recurring revenue) preferred; e-commerce volatile and risky

Customer concentration: <20% revenue from single customer safe; >50% = binary default risk

Churn rate: SaaS <5% monthly churn excellent, 5-10% acceptable, >10% problematic for RBF repayment

Revenue share %: 2-5% of monthly revenue typical for SaaS, 5-15% for e-commerce (reflects risk)

Repayment cap: 1.3-1.8x for SaaS (lower risk), 2.0-2.5x for e-commerce (higher risk/return)

Risk Considerations

Understanding these risks is critical before investing in revenue-based financing (rbf).

Revenue decline risk: If company revenues drop 30-50%, repayment stretches from 18 months to 5+ years
E-commerce volatility: Facebook/Google ad costs swing 50-100%; e-commerce RBF defaults 8-12%
Platform risk: Pipe struggled to scale, acquired; if platform shuts down, contract enforcement unclear
Dilution mismatch: Founders take RBF to avoid dilution but 15-20% IRR often exceeds cost of equity
Underwriting opacity: Revenue quality varies; recurring SaaS safe, one-time project revenue risky

Related Investment Opportunities in Private Credit & Revenue-Based Financing

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