February 3, 2022
Is Pipe just for SaaS companies?
Is Pipe just for SaaS companies? We get this question often enough that we thought it deserved a blog post of its own.
Here’s the long and short of it: Pipe is for all sorts of companies that have recurring revenue, regardless of industry ... From SaaS to service businesses to D2C subscriptions and well beyond.
A little backstory
Pipe initially launched with SaaS companies in mind. SaaS companies were a natural fit for what we were building because of their recurring revenue models and unique challenges. Many SaaS companies experience a long CAC payback period gap, which they try to close by offering customers big discounts—typically as high as 30%—as an incentive to pay annually. Of course, this can impact revenue recognition and profit margins and ultimately drive down the company’s overall value.
But the challenges and opportunities of recurring revenue don’t just impact SaaS. Companies across a range of verticals—from D2C subscriptions to service business, insurance to property management, gyms to pest control—bring in recurring revenue. And today, more than half the companies trading on Pipe’s platform are outside of SaaS.
Pipe exists to help this spectrum of recurring revenue companies access non-dilutive capital, without sacrificing margins. By trading monthly and quarterly recurring contracts on Pipe’s trading platform, companies across industries can bring in up-front capital to scale the business, acquire new customers, and expand into new markets without offering discounts, taking on restrictive loans, selling equity, or shouldering the substantial cost of capital that comes with a merchant cash advance or traditional revenue-based financing.
So, can my company use Pipe?
If your company has proven product/market fit and predictable recurring revenue (typically around $100k in ARR or more), Pipe could be a great fit. Whether you’re in SaaS, D2C, professional services, real estate management, or maybe you’re even a VC or angel investor, you may be able to trade your recurring revenue for non-dilutive up-front capital for growth.
Pipe for direct-to-consumer subscriptions
One of the major trends leading to the rise of recurring revenue as a new asset class is the growth of direct-to-consumer subscription businesses. It may come as little surprise, considering that you can purchase just about anything via a D2C subscription today—from CBD products and prescription medication to fashion and accessories to animal feed. In fact, a widely cited stat from the Subscription Trade Association (better known as SUBTA) anticipates that 75% of D2C brands will offer subscription services by 2023.
These subscription services can be great for consumers and convenience, but when revenue comes in via monthly or quarterly subscription fees, D2C companies can find themselves in a bind when they want to stock up inventory for the busy season, upgrade their technology, or ramp up marketing campaigns. The paperwork for bank loans or the heavy lift of fundraising—while certainly justifiable if that’s how you capitalize your business—can divert founders’ attention at a moment of all-hands-on-deck. It can be different, though: By pulling forward their recurring revenue through Pipe, D2C founders can stay focused on driving impact for their businesses—rather than scrambling to make ends meet.
Learn more about how Pipe works for direct-to-consumer subscription businesses.
Pipe for service businesses
Today’s service providers increasingly leverage technology to create more stable, predictable revenue and cash flow. To name just a few, companies that provide fitness memberships, lawn care, cleaning and maintenance, and professional services like accounting and bookkeeping are all seamlessly bringing their clients into subscription-style arrangements.
These recurring services make life a little easier for customers and take a lot of the friction out of regular transactions. But service companies can still see peaks and valleys in their revenue, leaving them chasing payments when money is tight or when they need cash to scale.
Like SaaS and D2C subscription companies, founders of service businesses recognize that predictable recurring revenue is a valuable asset—and that asset deserves a new kind of financing that enables companies to grow without debt, dilution, or additional operational complexity. With Pipe’s trading platform for recurring revenue as a capital solution for service businesses, customers can pay on their preferred schedule, and founders can be less reliant on the timing of that one big, critical invoice coming in. Phew.
Learn more about how Pipe works for service businesses.
Pipe for insurance companies
One of the trademarks of SaaS and D2C subscription companies is that they make products and services more accessible and convenient for customers. Innovative companies are now doing the same for insurance, in sectors from auto to homeowner’s insurance, rental to travel, pet to medical. They’re providing newfound speed and ease of use to consumers looking to find the right insurance for the best price, sign up, and seamlessly manage their accounts.
Like subscription-based models, many of these insurance companies and marketplaces have predictable revenue and scalable operations. They also face similar challenges around customer discounts, payment structures, and competition. Convenient, timely access to non-dilutive capital—without the hefty price tag of merchant cash advances and revenue-based financing or the restrictions of debt—can support their growth and success.
We’ve seen an increasing number of insurance companies and marketplaces turn to Pipe as they expand into new markets, grow their teams, and launch marketing campaigns to connect with new customers.
Accessing non-dilutive capital, your way
Not only can companies in most any industry use Pipe, but they can also trade on the platform regardless of their capital stack. Across verticals and business and funding structures—from equity-backed to bootstrapped and beyond, from SaaS to sports—all sorts of companies with recurring revenue now use Pipe as they grow.
By connecting directly to the capital markets rather than repackaging debt from a balance sheet, Pipe offers unique flexibility not often seen from lenders, VCs, revenue-based lenders, or merchant cash advance providers. Many VCs work exclusively with high-growth technology companies. Similarly, many revenue-based financing companies and other lenders will only work with ecommerce or companies with large amounts of assets. But Pipe is truly industry agnostic. And the restrictions (like warrants and covenants) common to traditional financing options don’t exist with Pipe.
Pipe for whatever you’re building
If you’re already using—or planning on using—traditional financing options like loans or venture capital, you can use Pipe, too. In fact, we’ve seen founders use Pipe to strengthen their position, extend their runway, and bring a healthy capital stack to the negotiating table. Taking that a step further, VCs themselves are even utilizing the platform—fund managers can Pipe future management fees to help them run their funds more effectively and bring better returns for their partners. Put simply, Pipe is access to your capital, your way.
The variety of recurring-revenue companies using Pipe and their unique use cases for the trading platform are a testament to the creativity and ingenuity of founders and business builders. We’re excited to see a diverse spectrum of companies connecting directly to the capital markets and tapping into sustainable, non-dilutive financing as they grow. Whatever you’re building, you can finance it with Pipe.*
We’d love to hear your Pipe story! If there’s something you’d like to read or a unique use case you’d like to share, let us know here.
Disclaimer: Pipe and its affiliates don't provide financial, tax, legal, or accounting advice. What you're reading has been prepared for knowledge-sharing and informational purposes only. Please consult your financial and legal advisors to determine what transactions and decisions are right for you and your business.
