Security start-ups often find themselves in a capital grey zone. Too early for venture debt, too revenue-light for traditional loans, and allergic to equity dilution. Enter revenue-based financing (RBF): non-dilutive capital repaid as a percentage of monthly revenue.
It sounds perfect. But like most “founder-friendly” terms, the fine print matters.
The Pros
No equity dilution. RBF lets you fund growth without giving up board seats, voting rights, or future upside. Your cap table stays intact.
Payments flex with revenue. You pay more in good months, less in slow ones. It’s pressure-aligned with your actual performance—unlike fixed repayment loans.
Faster approval than VC. No pitch decks, no partners’ meetings, no three-month due diligence sprints. If your MRR is real, you’re fundable.
Founders stay in control. No investor influence on hiring, roadmap, or exit strategy. You steer the ship.
The Cons
It’s not cheap. Total repayment can be 1.3x to 2x the amount borrowed. The interest is hidden in the revenue share, not a rate on paper.
Cash flow strain in high-growth phases. If you hit a sudden upswing, your repayments spike. That can hurt during heavy reinvestment periods.
Not all revenue is equal. RBF providers may only count recurring revenue. Services, hardware, or setup fees might be excluded from your borrowing base.
It’s short-term capital. RBF works best as a bridge or marketing accelerator—not a funding plan for two-year burn.
For security-focused SaaS companies, RBF makes sense when you’ve got stable MRR, strong gross margins, and a clear path to CAC payback. It’s especially powerful for channel expansion or go-to-market pilots.
But it’s not a substitute for long-term capital planning. Use it like jet fuel—not the flight plan.
Done right, RBF can buy you time, leverage, and breathing room. Just don’t mistake it for free money.
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