Technological and financial developments bring a new diversity of financing methods for companies, allowing to have more flexible, fast and inclusive solutions.
Fundraising gives way to new, more practical, more instant and more inclusive financing, such as Revenue Based Financing.
Fundraising is no longer the corporate Eldorado
Fundraising is not as popular as it used to be. Faced with the uncertain macroeconomic context, the increase in the price of raw materials and inflation, investors have become more cautious. Venture capital funds no longer invest as much, and when they do, it is only after harsh, careful and unnecessary selection.
In 2022, “Growth at all costs” is no longer the investment norm. Mega rounds have given way to more reasonable investments, in companies whose economic model is more stable, more secure.
In this unprecedented context, inequalities in access to finance have increased. The studies of the founders, the number of partners and the 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 the table). Thus, according to Dr. Pierre-Nicolas Schwab for the research company Into The Minds, companies founded by women represent only 7.96% of the amounts financed in Europe.
So, given the lack of equity in fundraising, what is the true sustainability of this funding method? 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 fundraising, these have the significant advantage of allowing the entrepreneur to finance their business while keeping their stake intact.
There are therefore two opposing modes of financing:
- The first, the bank loan, has many disadvantages: rates are rising and access to credit is increasingly restricted. The steps and delays, from the constitution of the file to the final decision, are also long and without guarantee of success.
- The second, innovative, allows you to get financing quickly thanks to mainly digital solutions. This new approach evaluates the company’s risks differently. Indeed, instead of only analyzing the historical balance sheet and tax data, the new financing methods analyze the growth projections of the companies’ revenues.
It is among these new financing methods that emerges Revenue-Based Financing, an innovative and flexible solution, suitable for many companies.
Revenue-based financing: fast, flexible and more inclusive
The principle is simple. It allows companies to generate money in less than 48 hours, based on current and future revenues. Data is analyzed online, securely, to grant funding in record time. In very concrete terms, the software integrates in read-only mode with the various tools of the company (invoicing, accounting, bank accounts) thanks to open banking. The startup therefore has a real-time 360° 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 at the bank, 48 hours is 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 observed a real need for simplicity and transparency among entrepreneurs. Non-dilutive financing, such as RBF, is a fair solution that is the opposite of traditional financing solutions: the selection of companies eligible for financing is made only on objective criteria related to the data on the operation 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 time. At the time, no bank had lent to us! Financiers by training, perceive the non-dilutive financing model as a small revolution in the heart of a dusty banking system, historically very regulated and restrictive for entrepreneurs: loans are long to obtain, prodigious files and loan criteria too rigid. We did not have the breadth of band nor the profile to establish the demand for our pioneering ambitions of inclusive and responsible fashion. Today, we are growing so fast that Almé has set the goal of achieving 6 million euros in annual turnover in three years, we have raised funds and continue to integrate the RBF in the management of our activity.”
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 interesting alternative to fundraising.