SaaS businesses either struggle to raise capital or can’t access capital without selling equity. Most SaaS businesses don’t have the growth rates to sell equity to VCs. As these are either more steady bootstrapped businesses or previously venture-backed businesses, they have little to no options when it comes to raising capital.
Solving this issue, London-based and Berlin-based Vitt (which means finance in Hindi) is building the future of financing for SaaS companies to raise fast, non-dilutive, founder-friendly cash for growing their businesses.
Emerges from stealth mode
Claiming to be “the future of financing for SaaS” startups, Vitt has picked up $15 million in a mix of equity and debt funding. The round was led by Better Tomorrow and SpeedInvest along with participation from Village Global, Entrepreneur First, Zayn Capital and the founders of Wayflyer (Aidan Corbett), Comply Advantage (Charlie Delingpole), Peakon (Phil Chambers), and Choco (Daniel Khachab) among others.
Also, the company emerged from stealth mode with this investment. It has launched the alternative to venture capital for UK startups. With this, Vitt will give founders instant access to cash up front, rather than waiting for monthly billing.
“During my three years in Venture Capital, I became acutely aware of how limited the ‘VC product offering’ was for entrepreneurs. Not only is it slow – a multi-week, C-level intensive exercise – but it is incredibly costly. Selling equity short-changes both founders and early employees who do the work and take the real risk. Company value should be owned by value-creators, not capital providers,” said Saket Kumar, cofounder and CEO of Vitt.
On the opportunity, Speedinvest General Partner Stefan Klestil commented: “The strong market pull from software businesses for new financing models & Vitt’s innovative & fast new solution leaves them well-positioned to dominate the subscription financing market. Cofounders Saket & Greg’s obsession around building the best financing solution for founders leaves us excited to partner with them on this journey.”
Jake Gibson, General Partner at Better Tomorrow Ventures (an angel investor in Clearco) said: “Vitt brings a much-needed addition to the early-stage financing landscape in Europe. In addition to creating a valuable product for a customer that was previously limited in its choices when it came to raising capital, the rapid digitisation of the economy has meant a rise in smaller opportunity businesses that use SaaS models but aren’t viable for venture investors. Vitt provides a fantastic alternative for these companies and one that sets itself apart from competitors and incumbents.”
Uses proprietary data model
The alternative financing company uses a proprietary data model to underwrite and evaluate a SaaS business’s core metrics. SaaS businesses either bootstrapped or venture-backed) starting from a £100,000 ARR can get financing with a simple 5-minute application. This replaces time-consuming VC interviews and due diligence. Eventually, it lets founders focus on running their business.
Initially targeting early-early stage startups, Vitt’s vision is to become the first fully digital investment bank to serve all SaaS businesses on the planet. As per the company, they are building ‘Goldman Sachs for SaaS’.
How does it help startups?
Customers receive an offer of capital based on an assessment of contract values and SaaS metrics within hours and they share an overview of subscriptions, open banking information, and accounting data. Vitt uses this to conduct a risk assessment before making an offer. On making an advance against SaaS receivables, the company makes margin against expected cashflows.
Talking about competition, Vitt faces challenge from Pipe, Clearco, Capchase and Uncapped. While its competitors are focused on exchanges or marketplaces for contracts with recurring revenues, Vitt focuses on SaaS and wants to support all startups in this segment.