The SaaSBOOMi community has announced a debt fund for SaaS startups affected by the coronavirus pandemic. This debt fund will be structured as revenue financing, where startups will repay the borrowed funds out of their revenue, on a monthly basis.
“We chose a revenue financing model for this fund because most SaaS companies have subscription billing and therefore there is a lot of visibility on their incoming cash flows,” said the Manav Garg, founder of Eka Software and a mentor for the debt fund. In addition to Garg, Vinod Muthukrishnan, cofounder of CloudCherry, Pallav Nadhani, cofounder of FusionCharts and Avinash Raghava are part of the SaaSBOOMi debt fund mentorship team
The fund has currently partnered with Indifi to collect about INR 40 Cr – INR 50 Cr for the first round of financing, but will be adding more NBFCs partners to increase the fund size as per the demand. The team has claimed to offer a 10-day turnaround time for the fund disbursement, once the company has successfully passed the fund’s vetting process. The companies will have to approximately start repaying the borrowed fund after a year or two, depending on the conditions.
The eligibility parameters for a company to access this fund include a minimum of 24 months operation, with 12 months of recurring revenue proof and at least six months of revenue stability. Further, the annual revenue rate of the company should be $250K or above. The fund’s investment will not include any equity dilution.
However, SaaS companies have been one of the positively impacted sectors in the coronavirus pandemic. Garg told Inc42 that coronavirus has impacted different industries in a different way and so there will definitely be a little bit of impact on SaaS growth in the short term. And when that happens, SaaS companies will need capital to grow their business and continue to serve their customers.
Adding to this, Muthukrishnan said that this platform will also help SaaS founders to access mentorship and guidance to navigate through this unprecedented economic crisis. He noted that most of the SaaS founders are new and haven’t even experienced the Great Depression wherein the condition was relatively better than today’s crisis, so this fund will give them an opportunity to tap into the existing knowledge of the veteran SaaS founders.
Earlier, SaaS unicorn Freshworks founder Girish Mathrubootham also noted that this quarter may have a smaller impact on SaaS companies, but next quarter will have a larger impact on the company’s business. He suggested that CEOs need to re-examine the revenue cycles etc and should go into cash-conservation mode. With the pandemic locking people inside their homes, VC funding and investments are also expected to dry up, he had added.