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New ways of fundraising: Startups are getting funded by other startups quickly via algorithm and accessing all their revenue data

In recent years we have seen how some startups were turning to alternatives to their traditional sources of financing, led by venture capital or loans. For example, with financial products such as ClearCo’s, which offer financing based on income, or Pipe with its platform that links investors with startups with a certain income potential.
Now there are more alternatives similar to ClearCo, but European, such as Silvr, a French startup that seeks to lend money to other startups, especially for somewhat riskier purposes than those that traditional banks would be willing to finance, relying on the use of multiple data sources from those startups to make decisions about whether or not to lend, and how much. And always without entering its shareholding, something perceived as a risk for the founders, fearful of being diluted to face certain operations.

For companies that do not yet have assets or are too risky for bank financing

Silvr, a French startup that has just achieved a financing round of 18 million euros and has opened a credit line of 112 million euros, is targeting e-commerce and SaaS (software as a service) companies throughout the European Union, especially with startups that still do not have assets to support the credit granted, which makes them less attractive for traditional banks.
In the case of a startup that wants to access certain credit, it has to grant Silvr access to various sensitive internal data, such as the corporate bank account, its Google Analytics panel in which to see the detailed traffic of its website or its applications, online payment gateways such as Stripe or the Shopify panel, if applicable, among other sources.

Once Silvr has access to all this data, and making use of screen scraping (artificial recognition of text and data on the screen), it extracts a level of score elaborated by its own algorithm, something similar to the credit scoring so common in the United States. , but applied to companies. That score refers to the future revenue you predict for that business based on its billing to date. Once you get the credit, you can choose to repay it through traditional installments or by committing a percentage of future income.

This model, especially focused on the return of capital through a percentage of turnover, is also applied by another company, also French: Karmen, which also plays with its own scoring algorithm obtained from the data to which the company grants access. In exchange, it charges a previously set commission, but also based on the risk of each operation and the return period. Another similar, but British, is Uncapped.

And in the national field, Capchase, founded in Boston but with a good part of its Spanish staff. It is also oriented so that startups can finance their own operations without having to open up to external investments that cause them to lose part of their shareholding. They do this by advancing recurring money from clients they have just acquired in exchange for a commission of around 10%. By their own definition, they “bring money from the future to the present.” They have many ballots to become one of the next Spanish unicorns.
These options are not suitable for startups that do not yet have a recurring monthly billing, but for those who want instant capital without giving up shares
In some credit estimation simulations we can see that Karmen offers capital worth 4.8 times the monthly recurring income, regardless of whether we start at $1,000, $10,000 or $100,000 per month. Uncapped does not allow these simulations to be carried out, but they guarantee “up to 5 million euros”. If they manage multiples similar to those of Karmen, it would be what they could deliver at most to startups with billings of around one million euros per month.
All of them promise, in addition to not diluting the founders, like venture capital, or not requiring them to deal with debts on a personal level, like traditional loans, an almost immediate availability of money, between 24 and 72 hours compared to the weeks or directly a semester that can lengthen the process in other traditional sources of financing for a startup.
They want to expand throughout Europe after having achieved some success stories in the United States or in their native France, as well as in the United Kingdom in the case of Capchase because it is the European financial epicenter, and start giving startups access to fast capital, especially in cases where bank financing is not yet an option or not entirely convenient; as well as in which the risk capital remains large or does not compensate for its implications.

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