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If you鈥檙e familiar with SaaS (software-as-a-service) companies, you know they report revenue on an annual basis. But because most customers prefer to pay on a monthly or quarterly basis, many SaaS operators turn to raising external capital in order to keep operating.

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Enter , which this morning announced it raised $6 million in seed funding led by .

, and founded Pipe in September 2019. Their goal is to offer SaaS companies a way to grow without diluting their current cap table.

Pipe claims it does this by offering an instant cash advance against the full annual value of a company’s software subscriptions. So basically, according to co-CEO Hurst, it turns monthly recurring revenue into annual recurring revenue.

鈥淲e built this for SaaS companies because they, in particular, benefit from immediate payment,鈥� he wrote via email. 鈥淲ith Pipe, they don’t need to discount revenues to entice customers to prepay.鈥�

, , 听贵辞耻苍诲别谤听, General Counsel , , and also participated in the round. (There’s been a recent trend of startup founders investing in other startups as of late, such as in the case of Front, which we wrote about here.)

The premise behind the Los Angeles-based company was appealing to , co-founder and general partner at Craft Ventures. Historically, he said, the main financing option for SaaS companies has been dilutive equity rounds.

鈥淧ipe is the tool every SaaS founder has been waiting for,鈥� he said in a written statement. 鈥淚t allows SaaS companies to grow without dilution by financing their SaaS receivables.鈥�

How it works

Pipe says it is addressing a (as of 2018), which is growing by double-digit percentages year over year.

The Pipe鈥檚 platform assesses a customer’s key metrics by integrating with its accounting, billing and subscription management systems. It then makes 鈥渁n instant decision on whether the company qualifies for a PipeLine of finance.鈥� Facilities range from $10,000 per month to several million dollars per month for later-stage companies.

I was curious as to how Pipe could provide such facilities with just $6 million in seed funding. Hurst told me the company is also聽backed by debt providers (such as ) to be able to provide the facilities to its customers. But he emphasizes that Pipe is “not providing debt,” and is “not a loan.”

CEO said his SaaS company has risked losing deals in the past by requiring annual upfront payments when customers wanted to pay monthly.

鈥淧ipe solves this for us and allows us to invest more heavily into our growth,鈥� he said. 鈥淚t may easily save us a fundraise.鈥欌��

Pipe has only officially been in the market for a few weeks but Hurst said it鈥檚 been 鈥済rowing 100 percent week-over-week during beta.鈥� The company is officially launching out of beta today.

The six-person company plans to use its first round of funding to expand its sales and engineering teams out of its L.A. headquarters and in San Francisco and Phoenix. But looking ahead, the company considers what it鈥檚 doing 鈥渁s a global opportunity.鈥�

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