Silicon Valley Bank, the 16th-largest bank in the United States, collapsed on March 10, 2023. With over 40,000 customers, many of which were tech and SaaS companies, the impact of this loss shook many SaaS founders and the decision of where they will pursue funding. As banks and private equity hubs encourage SaaS clients to pursue different funding, the time is now to consider better alternatives to venture capital.
Read on to explore why better alternatives to venture capital are warranted, and how strategic funding mechanisms like debt funding can help you achieve your growth goals in the year ahead and continue scaling in spite of the strange economic and funding circumstances after the Silicon Valley Bank (SVB) collapse.
Why Consider Better Alternatives to Venture Capital?
Venture capital deal activity has been steadily slowing down, dropping over 30% in the last year alone. Despite the slowed deal developments, startup spending has been holding steady. SaaS companies and startups need funding to accelerate their growth, but as venture capital deals dwindled, trouble emerged. This same conflict played a role in the collapse of the SVB.
Panic bubbled in the days before the collapse as the venture and startup community began to pull money from SVB and open new accounts, catalyzing a bank run that SVB failed to survive. Regulators stepped in and formally shut down the bank after the failure. Though typically only funds up to $250,000 are insured, the U.S. government has announced that all depositors will be made whole.
Had they not, SaaS companies would have suffered immediate financial losses with impacts to payroll, growth efforts, and other expenses. This event, in addition to the decline of equity funding availability and deals, leaves many SaaS founders seeking better alternatives to venture capital. For your future funding mechanism, consider venture debt financing.
Advantages of Venture Debt Financing
Venture debt financing is a flexible non-dilutive funding option that delivers financial support to SaaS companies in the form of a loan. Unlike equity funding, there are venture debt financing structures that allow SaaS founders to maintain full control over the ownership of their company and don’t require any shares to be handed over in exchange for funding.
While some debt funding providers require warrants, which would allow the lender to purchase shares at a set, often lowered price later on, River SaaS Capital never uses warrants. Venture debt financing allows SaaS companies to manage their equity loss while still receiving the funds they need to accelerate their growth.
Some benefits of venture debt financing include:
- Faster Funding – Venture debt capital becomes accessible much faster than its private equity counterparts, which allows you to put funds toward growth-generating initiatives faster too. The streamlined process prevents you from wasting time with extensive paperwork or long waiting periods and instead gets the funds you need in your hands faster.
- Flexible Financing – Whether you want to boost your marketing, hiring, or customer retention, venture debt financing is uniquely suited to help you swiftly dedicate funds to where it will make an impact. Debt financing can also be used to boost sales efforts, which helped SaaS companies see more growth in 2022 than venture-backed startups who heeded the advice to cut sales and marketing spending.
- Reduces Churn Rate and Manages Your Runway – For SaaS companies between raise rounds, or those who have been impacted by the decline of venture capital deals, venture debt funding is the ideal solution. Reduce your churn rate and better manage your runway with fast, flexible, non-dilutive funding.
- Complements Existing Equity Financing – SaaS companies who have taken equity funding before can utilize venture debt financing to boost their valuation and position themselves more strongly before the next raise round. You can also utilize venture debt funding to better manage your equity loss without losing access to the funds you need to push forward and grow.
Types of Debt Alternatives to Venture Capital
Venture debt funding solutions are strategic alternatives to venture capital and can be tailored to what best suits your unique needs, including the way you’d prefer to repay your loan.
- Standard installment loans will be provided in a lump sum and you will make payments on the principal and interest for a set period of time.
- Interest-only structures enable you to pay only the interest of your loan for an agreed-upon period of time before you begin to pay any principal. This allows you to keep and reinvest as much revenue as possible back into your business to skyrocket your scaling.
- A step-up structure offers fluctuating payments month to month based on your revenue and growth, but these terms are determined at the start of the arrangement so you know precisely what to expect.
No matter your unique needs and goals, venture debt funding solutions can be tailored to serve your growth.
Contact River SaaS Capital for Strategic Alternatives to Venture Capital
At River SaaS, we offer innovative, strategic alternatives to venture capital, and celebrate a long history of supporting our SaaS clients’ successes. We take a relationship-based approach with our clients and strive to support you with more than just funds. Whether you’re a SaaS startup seeking a tried-and-true go-to-market strategy or you’re a SaaS company ready to take your business to the next level with an expert growth strategy, we offer strategic insight, recommendations, and solutions to support you.
After the collapse of the Silicon Valley Bank and the continuous decline of equity funding deals, it’s time to consider more viable alternatives to venture capital. When you choose debt funding with River SaaS, you can count on fast, flexible funding that supports your unique growth and never takes away ownership of your company.
Contact us today to learn more about how our unique solutions can best serve you.
