Why CEOs Need to Get Strategic About Fundraising

In calm waters, every ship has a good captain. It’s rough waters that provide a true test of leadership.” - Swedish Proverb

Certainly, the tech sector has been facing some choppy water in recent months. Global VC investment plummeted — down more than 50% year-over-year — putting even the sturdiest software startups under huge financial strain. 

Source: Crunchbase

Which companies withstand that pressure and survive the funding drought will depend almost entirely on strategic decisions made at an executive level — especially when it comes to fundraising and managing cash flow.  

It’s a buyer’s market

With the faucet dripping instead of gushing, the balance of power is currently very much with investors. 

That means SaaS leaders who sign term sheets now will wind up giving up much more equity for every dollar they bring in. Effectively, they’re trading away a bigger piece of the pie, and getting less in return.

The same applies to debt financing. Taking on debt to keep the doors open might seem like a reasonable strategy, but lenders are moving slower than they used to, and many loans now come with strings attached. 

Don’t hunker down

Of course, companies can’t afford to simply hunker down. Costs are climbing, and enterprise customers are cutting spending. Companies that fail to secure ready access to capital could find themselves running out of runway — or unable to grow once the market improves.

Companies need to  think strategically about cashflow and capital. That means thinking not just in terms of how to access the money they need, but also about what they’ll give up in order to access that capital.

Seek low-cost capital

One smart approach that savvy software leaders are now exploring involves using alternative, tech-enhanced forms of fundraising. 

With AI-powered fintech tools, SaaS vendors can glean insights into the reliability and likely longevity of their customer subscriptions by analyzing complex transaction data. 

These insights can then be used to secure advances linked to the business’s recurring revenue — with no need to give up equity or accept burdensome covenants.

An integrated solution

Because fintech solutions are anchored directly into companies’ backend systems, there’s far less red-tape: the information and data needed to secure capital is already available, so companies can get speedy access to capital on far more favorable terms than would otherwise be possible.

That kind of agility confers a vital strategic advantage on SaaS vendors striving to remain nimble in the face of economic uncertainty. Ready to start thinking strategically about how your company raises capital? Reach out to Ratio today.  

Tags:
Finance
Pricing
published on
August 17, 2023
Author
Carlos Chou
Chief Commercial Officer
Enterprise technology executive with extensive experience with leadership roles in some of the most iconic companies and founders including Oracle, SAP, Workday, HP and more.
SEE MORE CONTENT
Related Posts
Finance

Pros and Cons of Venture Capital: Is it Right for Your Startup?

Venture Capital (V.C.) in the U.S. continues to surge in 2023, with projections nearing $70 billion. This presents a prime opportunity for early-stage ventures aiming to scale and thrive.However, the landscape is fraught with challenges. Less than 1% of small U.S. businesses manage to secure V.C. backing, and 25% are still looking for additional funds. For entrepreneurs, it's a path of both opportunities and obstacles.

Ratio Team
September 20, 2023
Finance
Trading

Exploring Pipe Competitors and Alternatives: An In-Depth Analysis

In this post, we'll break down top-notch competitors to Pipe, including Ratio, Founderpath, and Liberis. From standout features to pricing, we've got you covered.

Ratio Team
August 25, 2023
Finance

Managing Core SaaS Metrics is Getting Harder: Here’s the Solution

The days of rudimentary monthly cash flow and profit / loss calculations are long gone, with recurring revenue, customer acquisition costs, churn rates, and other SaaS-specific financial metrics now the basis of make-or-break strategic decisions.

Ashish Srimal
August 14, 2023