Pipe: Business-Funding Fit

Pipe is building an entirely new asset class based on recurring revenue contracts. It’s not equity and it’s not a loan. Pipe lets businesses raise money today by selling their monthly or quarterly subscription cash flows directly through its platform.

There should be a better way to finance recurring revenue businesses.

That’s it. In less time than it takes to set up a Slack group, your company can raise as much money as it might in a months-long, dilutive venture capital fundraising process or in an equally painful venture debt raise that leaves you with liens on your business and warrants outstanding.

John Street Capital did a deep dive comparing Pipe to the three traditional types of external financing in Recurring Revenue: The Rise of an Asset Class. Based on his assumptions, he found that Pipe was the cheapest cost of capital for a fast-growing, subscription-based business.

Pipe is in the business of creating Business-Funding Fit. Its skills -- pulling in companies’ financial data via APIs, assigning ratings based on that data, attracting investors, providing liquidity, and managing seamless ongoing financial transactions -- will be extensible to many more subscription-based business models over time.

This is not a “VC is bad” piece.

Pipe solves the problem that both Hsu and Danco alluded to: right now, the way that startups fund themselves doesn’t match their business models or maturity. Product-Market Fit gets most of the headlines. Product-Founder Fit is an up-and-comer. But Business-Funding Fit -- funding each business with the right type of capital -- is an equally importa... See more

What Danco and Hsu both realized in two steps is:

This is Pipe’s flywheel and network effect: more bids → better prices → more companies → more bids.

Based on the fact that most founders are builders, not CFOs, it’s a fair assumption that most founders aren’t naturally skilled capital allocators and so aren’t aware of all of the alternative methods large companies utilize to finance their businesses. What I see happening in B2B fintech is a sort of ‘consumerization’ of these previously unknown a... See more