Scaling a small business comes with a wide range of challenges, but the greatest hurdle most entrepreneurs face is accessing the capital needed to fully embrace the next stages of growth.
For service-based online startups, that difficulty is heightened as banks may be hesitant to loan to them without traditional assets for collateral. Alternatively, entrepreneurs often seek investors to provide funding through options like Series A rounds and beyond, however, these just serve to dilute the founders’ stake in the business as they raise more and more outside capital.
Miami-based startup Pipe is working to make things easier for growing businesses. The “two-sided trading platform” offers companies access to capital without being forced to take out loans or dilute their ownership with investors — all by using recurring revenue as an asset.
“Up until now, SaaS businesses had only two choices: scale fast while accepting significant debt or dilution, or bootstrap while accepting less available cash flow and usually slower growth,” said Pipe customer Des Traynor, co-founder of Intercom. “Pipe is now the third option: scale without dilution.”
In an era where it’s easier than ever to start a company and many companies insist on investing revenue into growth as opposed to searching for a profit as soon as possible, the model for traditional loans has stagnated,
“At Pipe, we’ve built the world’s first trading platform for recurring revenue to help accelerate growth for entrepreneurs without the burden of debt or dilution,” said Harry Hurst, co-founder and co-CEO of Pipe.
“Pipe has become a mission-critical part of our customers’ growth over the last year and this strategic financing further cements our position as the first and only trading platform for revenue as we build over the coming decades.”
How Pipe helps businesses help themselves
Founded in 2019, Pipe’s goal is to “offer companies with recurring revenue streams access to capital so they don’t dilute their ownership by accepting external capital or forcing them to take out loans.”
It works by assessing a customer’s key metrics by integrating with its accounting, payment processing, and banking systems. Then, Pipe instantly rates the performance of the business and qualifies it for a trading limit. Trading limits currently range from $50,000 for smaller early-stage and bootstrapped companies to over $100 million for late-stage and publicly traded companies.
That wide range means Pipe doesn’t just work with startups, but any rapidly scaling company seeking additional funding. And not only does it offer instant access to capital for companies, but it also allows investors to diversify their portfolios with automated trading.
“The best way to summarize it is we can work with any company that has a high degree of predictability around their revenue,” Hurst explained. “We’re helping companies grow on their own terms. Virtually every company in the world has a recurring revenue model already, or if they don’t, they’re thinking about how they can shift to it.”
Pipe has no cost for capital. Investors compete against each other for deals on its platform and in return, Pipe charges both parties a fixed trading fee of up to just 1%.
“They’re building tools on the product side and we’re providing access to capital markets, and especially in the case of early-stage companies that would not otherwise have access to capital, we’re trying to level the playing field,” said Hurst.
Pipe is primed for global expansion, already seeing traction in Europe, Asia-Pacific, Latin America and Canada, with India to soon become one of its largest markets.
Pipe’s own growth
The expansion comes off the back of Pipe’s own recent traditional funding: Pipe recently announced it has successfully raised $250 million in strategic equity funding, valuing the company at $2 billion. Just two and a half months prior, Pipe had raised $50 million from a number of high-profile investors.
“By fundamentally changing the way entrepreneurs and organizations raise capital to fund their growth, Pipe has quickly emerged as one of the most important financial technology companies in the world,” said the leader of the funding round, Ashton Newhall, managing general partner, Greenspring Associates. “Our investment will further Pipe’s mission to put companies in the driver’s seat of their growth.”
There are now over 4,000 companies using Pipe, with tens of millions of dollars currently being traded every month.
With over 11,000 SaaS companies in the world, and worldwide public cloud revenue growing above 17% year-over-year, the possibility for Pipe’s expansion is undeniable. The market opportunity will only widen as more founders look for non-traditional funding options while embracing a new digital-focused future of work.
Miami and beyond
In the post-COVID work world, Pipe is also leaning into a decentralized office concept. The platform currently employs team members in New York, Portland, Seattle, California, and Europe, in addition to its Miami “microhub.”
“As we build up hubs of people within the company, it makes sense for us to invest into strategic locations and set up physical space for people to, at their leisure, collaborate in person once it is safe to do so,” explains Hurst. “It is never going to be mandated that you need to be in the office, but what we are trying to provide for is a quiet, private collaborating space for our team members.”
The next micro hub will likely be in New York City, with plans for further expansion in Europe and Asia, too.
But Pipe COO Michal Cieplinski touts Miami’s culture of innovation. “Knowing that tech is so strongly supported in Miami is invigorating… It’s ready for tech.”
Off the back of its new funding, the company will greatly boost its employee count in the city.
“Harry and I are really committed to building the tech ecosystem,” says Cieplinski. “We’re actively hiring and looking to mentor young entrepreneurs in the Miami area … We are investors too – we want to find the young talent… Miami breeds innovation in a way we weren’t expecting.”