May 26, 2022
How Pipe works for D2C subscription businesses
Growing your business can be tough when your revenue, production, or inventory ebb and flow in less than perfect harmony. For direct-to-consumer companies (also known as D2C or DTC), it can make the cash flow—and burn—a bit of a roller coaster. Today’s D2C founders and operators manage it all in the face of shifting production times, unpredictable financing journeys, and (shipping) delays, delays, delays.
To level things out and enable the business to scale in the right way and at the right times, many D2C founders say they find themselves in a constant state of fundraising. For some, it’s a welcome and exhilarating part of the job. For others, it can feel like a distraction from building the core business.
Either way, when you’re going direct to consumer, speed, flexibility, and ease of use are key—so you can stay focused on your products and your customers. Let's take a look at how D2C businesses can use recurring revenue financing through Pipe to achieve their goals.
The subscriptionification of D2C
As times change, D2C businesses innovate. Founders and their teams constantly find great new ways to connect with their customers and deliver the goods (often literally!). Subscriptions are one of those ways.
From cosmetics to craft crates, sporting equipment to specialty foods, just about everything comes as a subscription these days. And according to a widely shared prediction from the Subscription Trade Association (SUBTA), the trend will only continue—75% of D2C brands are expected to offer subscription services by 2023.
As D2C companies embrace subscription models, they also need to find financing models that fit. The growth trajectory of a scaling D2C company isn’t always a good fit for VC funding, which has long been a favorite source of financing. Loans can come with restrictions that don't align with founders’ and CFOs’ goals. Platforms like Pipe give founders back their time and energy so they can focus on building, innovating, and bringing their customers the next amazing thing.
How D2C founders can stop fundraising
For founders who want to lean into differentiating their companies and creating value, recurring revenue financing can help shift the always-fundraising dynamic. If a D2C company has product-market fit and predictable recurring revenue, pulling forward that revenue through Pipe’s trading platform can help capitalize the business with the flexibility, speed, and autonomy they need.
Efficient access to capital to breakdown inventory bottlenecks
Most D2C businesses share common challenges like having enough inventory at the right time when long production lead times separate costs and revenue. Fast access to non-dilutive capital can help businesses reinvest in growth and buy inventory when the price and timing work best.
D2C subscription companies also need the tech and talent to deliver a great experience to customers and grow that customer base as they scale the business. While investing in that tech and talent often has a significant and fairly quick ROI, finding the liquidity up front can be a hurdle when you don't have enough capital on hand.
How Pipe works for D2C subscription businesses
Equity is a powerful tool for long-range or speculative investments in your company, but it’s also dilutive: when you can quickly scale with a predictable ROI, it may not be worth the loss of control and ownership. With Pipe, you can access future recurring revenue right now, and sow it into product, people, and infrastructure so you can reap the rewards faster, all without giving up equity in your company.
While traditional e-commerce and retailers often rely on loans or equity financing to scale, those with D2C subscription businesses have recurring revenue that can be harnessed to scale. The underlying subscription—and the predictability it provides—becomes a valuable asset to help you grow your business. Pipe’s trading platform is the first in the world to allow you to sell recurring revenue streams directly to institutional investors for up-front cash. That trade gives you capital for growth exactly when you need it without the restrictions of loans, without diluting your ownership, and without many of the costs associated with traditional financing.
Getting started with Pipe
Not unlike a direct-to-consumer subscription, Pipe makes it easy to get what you need when you need it. When you sign up, you’ll securely connect your banking, billing, and accounting software to the Pipe platform.
Secure live data connections allow Pipe’s algorithm to give you a bid price and trading limit based on the health of your company and the performance of your revenue. With a trading limit in place, you can select any amount within your limit and trade those revenue streams for capital at any time.
You get the money in the bank within a few hours (sometimes less, depending on your bank), and the repayments are automatically withdrawn as those revenues streams come in.
Using up-front capital for growth
Need to hire an engineer to take your website to the next level? Pipe it.
Ready to expand your marketing campaigns to enter a new market? Pipe it.
Want to buy inventory in larger quantities to get a volume discount? Yep. You can Pipe the funds for that too.
Once you’re set up, trading on Pipe gives you the agility to get capital at any time—a leg up in a business where timing is key.
Learn more about how Pipe works for D2C subscription businesses.
If you run a D2C subscription business, what would help you run your business better? What would you like to learn more about? Share your thoughts with us.
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.
