In today’s tough economy and fundraising climate, every startup is looking for ways to extend cash runway—whether by cutting costs, driving more revenue, or exploring new sources of working capital. One option gaining traction is revenue-based financing, which can provide capital without some of the trade-offs that come with raising equity in today’s market.
Our guest, Carlos Antequera, CEO of Novel Capital, is at the forefront of this shift. Novel specializes in revenue-based financing for startups with predictable income streams, particularly B2B SaaS companies. Carlos shares how his own startup journey revealed a gap in the funding ecosystem and why revenue-based financing is an actionable alternative for founders right now. He also offers valuable insights and practical advice for entrepreneurs navigating today’s environment.
How is Revenue-Based Financing Different from Equity?
Revenue-based financing is non-dilutive, so your startup doesn’t exchange any equity for the funds like you would in a traditional equity-based VC deal. Instead, you agree on a total return over a period of time and pay the lender back from your monthly revenue stream until the loan is paid off.
- For example, a startup seeking $1MM may agree on a return of 1.3, or $1.3MM, over the next 24 months. Once the amount is paid off, that’s it. In the meantime, if the startup used the $1MM to hire its first dedicated salespeople, who went on to sell an additional $2MM in contracts for the business, the value is clear. The startup has increased its revenue and valuation without diluting the founder or any other existing shareholders.
Revenue-based financing can offer a way to accelerate growth or extend runway for startups that have already proven market fit and have some level of predictable recurring revenue.
Revenue-Based Financing + VC Funding
A common misconception about revenue-based financing is that it’s not compatible with other forms of financing, like equity-based VC funding. Carlos dispelled this notion during our discussion, pointing out that for companies on a venture track, revenue-based financing can provide an ideal way to extend runway and provide a bridge until the company receives a VC offer from the right partner at the right valuation. Revenue-based financing can add value for startups, their customers, and existing or future investors.
…revenue-based financing can provide an ideal way to extend your runway and provide a bridge until your company receives a VC offer from the right partner at the right valuation.
Revenue-based financing is emerging as a smart tool for founders navigating today’s challenging capital markets. By protecting equity, aligning with growth, and working alongside future VC rounds, it offers startups a flexible way to extend runway and seize opportunities. Thanks to Carlos Antequera for sharing his expertise and shining light on this powerful alternative funding option on Startup Success.