Pipe: Business-Funding Fit

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

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.

Pipe is that better way. Even better than debt.

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.

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 needs to simultaneously attract companies willing to sell their recurring revenue and investors willing to buy it.

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

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

What Danco and Hsu both realized in two steps is: