Kansas City-based Novel Capital emerged from stealth and announced $115 million in initial equity and debt funding from undisclosed backers—the latest move in the growing realm of companies looking to offer founders alternatives to traditional venture capital.
Novel provides traditional revenue-based financing products through which companies can receive up to 30 percent of their expected annual revenue upfront in exchange for a percentage of future monthly realized revenue for three years. It also offers what it calls “Upfront Capital” which gives companies access to future subscription revenue for an upfront fee.
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Just last week, New York-based Capchase closed an $80 million Series B. The company’s platform enables recurring-revenue companies to access future capital upfront based on their annual recurring revenue minus what is typically a 5 percent to 10 percent discount. Two weeks earlier, Miami-based Pipe—which also helps finance companies based on their annual recurring revenue and was valued at $2 billion after its $250 million strategic equity investment in May—announced it had acquired London-based Purely Capital, a media and entertainment financing company, and is launching its own media and entertainment division.
Alternative finance platforms have seemingly been increasing in popularity for a while now and it’ll be interesting to see what role they may play as public markets have been hit hard by inflation concerns and global events, and there also have been rumblings that private markets are cutting valuations as well.
Will the platforms offer companies a life line if venture becomes harder to come by, or will startups fear receiving upfront subscription revenue if the economy becomes rocky?
Time will tell.
Illustration: Li-Anne Dias.
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