In the startup world, access to capital can mean the difference between success and failure. While 2023 Q1 saw the worst quarter for overall startup financing since 2018–early-stage funding actually grew during this period. This trend showcases that early-stage entrepreneurs are finding alternative ways to finance their startups. 

You may be considering Pipe, a “capital platform,” when looking for the right funding opportunity. But is Pipe the right fit? In this article, we’ll break down Pipe’s business model, the services they offer, and whether or not they’re the best financing platform for your startup. 

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What does Pipe do? 

Pipe is a platform that allows companies with recurring revenue streams to access capital by selling their future revenue to institutional investors. By connecting businesses with investors seeking to purchase these revenue streams, Pipe aims to provide flexible non-dilutive funding for growing companies. 

The platform leverages software to identify and assess the risk of recurring revenues, enabling investors to make informed decisions about which revenue streams to buy and at what price. 

However, this marketplace method means there can be limited transparency on funding amounts, speeds, and fees. Your startup’s future is in the hands of various external investors–not Pipe’s–which expands the pool of potential investors, but also limits your control. 

Who is the CEO of Pipe?

Luke Voiles was appointed as CEO by the board of directors in February of 2023. It was founded by Harry Hurst, Josh Mangel, and Zain Allarakhia in 2019.

Pipe Review

In this section, we’ll take a look at Pipe’s offerings, eligibility requirements, rates and fees, and the overall lending process.

Pipe Products & Offerings

Pipe’s business has two segments: one for businesses like yours and one for partners and investors.

For Entrepreneurs

This part of the platform functions as a marketplace, connecting businesses with investors who are interested in purchasing a portion of their future revenue in exchange for upfront capital.

To get started, businesses need to connect their banking and revenue accounts to Pipe’s platform, allowing Pipe to analyze their financial data and determine their eligibility for funding. Once the accounts are connected, Pipe’s underwriting system analyzes the data and provides a funding offer, which includes the amount of capital the business is eligible for and the terms of the financing, including the flat fee they’ll pay.

Businesses can choose to advance as much or as little of their funding offer as needed, giving them the flexibility to access capital on their own terms and only pay for what they use. Once the funding amount is chosen, Pipe facilitates the transfer of capital from the investor to the business’s account, typically within a few hours to a few days, depending on the bank’s processing times.

Repayment of the advance is done as a percentage of the business's future revenue. Pipe automatically deducts a portion of the revenue each month until the advance is fully repaid. The platform offers flexible repayment terms without fixed schedules or late payment penalties, making it an attractive option for businesses with variable revenue streams.

For Partners

‍Pipe's Capital-as-a-Service offering enables partners, such as vertical ISVs (Independent Software Vendors) and payment companies, to embed Pipe's proven capital solution into their own platforms. This allows partners to provide financing to SMB customers with access to growth capital without building a financing infrastructure in-house.

End merchants can then access capital through the partner's platform, with their transaction data being used to assess the health of their business.

By offering a capital solution through Pipe's Capital-as-a-Service, Payment Facilitators (PayFacs) and ISVs can provide their merchants with access to capital directly through the platforms they already use.

Pipe Eligibility

To be eligible for Pipe funding, businesses must be incorporated in the US and typically need to have at least $10,000 in annualized predictable revenue. Live bank and revenue connections are also required, with Pipe currently supporting Stripe and Square integrations. 

Pipe’s underwriting system analyzes various data points in your banking and revenue information to determine your eligibility and offer.

Pipe Rates & Fees

Pipe charges a single flat fee, which is a percentage of your advance amount. This fee is determined based on factors such as the health of your business, projected revenue, and sales volume. 

For example, if your fee is 15% on a $50,000 advance, your total fee would be $7,500. There are no compounding interest charges, personal collateral requirements, or penalties for late payments when sales are slow.

How Pipe Lending Works

To apply for funding through Pipe, you first need to connect your banking and revenue accounts to the platform. Pipe’s underwriting system will then analyze your data and provide initial terms within a few minutes. 

However, Pipe doesn’t provide the funding themselves. It’s a marketplace where other partners and investors can find businesses they’d like to invest in. These partners are looking at certain criteria, such as MRR, and are connected with businesses that match. 

Because it’s outside funding, there aren’t as many regulations on specific fees and funding amounts. So businesses without predictable recurring revenue or short runways could potentially receive higher rates and fees. And, there’s very little control over funds and pricing.

To receive final approval, you’ll need to provide additional business and owner information for Pipe to complete the verification process. Once approved, you can choose to accept the offer before it expires.

Pipe Pros

• Access to capital based on the health of your business
• Flexible financing options for a wide range of predictable revenue streams
• Simple pricing structure with a single flat fee
• No personal collateral requirements or penalties for slow sales periods

Pipe Cons

• Limited to businesses incorporated in the US
• Undisclosed amounts of funding available
• Pipe doesn’t fund startups themselves–funding comes from outside investors on the Pipe marketplace, resulting in less control over pricing and funding availability
• Fees may be higher compared to traditional financing options, depending on the health and projected revenue of your business
• Funding amounts and terms may vary based on Pipe's assessment of your business's risk profile
• Little transparency about funding amounts and funding speeds, since it’s based on various investors that Pipe doesn’t have control over

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Pipe Alternatives: Quick Overview

Pipe Alternatives: Complete Review

While Pipe offers a unique financing solution for businesses with predictable revenue streams, the marketplace model means that there’s no guarantee of a certain amount of funds in a specific time-period. 

Let’s look at some alternatives.

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1. Efficient Capital Labs

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Efficient Capital Labs (ECL) is a revenue-based financing provider that offers fast and reliable funding solutions for B2B SaaS companies. With a focus on simplicity and transparency, ECL provides businesses up to $2 million in funding with a streamlined application process and financing in under three days. 

Plus, with these funds coming from their $100M debt facility, you know exactly where your money is coming from. No hidden fees, no special requirements. Just a simple application and you can get financing within three days.

Services & Offerings

• Revenue-based financing up to $2 million
• Funding available within 72 hours
• Flat fee structure: 10-14% for USD funding, 12-16% for INR funding
• No equity dilution or warrants required
• Serves B2B SaaS companies with $100K+ ARR
• Underwrites customers across all geographies

Pipe vs Efficient Capital Labs

Compared to Pipe, Efficient Capital Labs offers a more specialized funding solution tailored to B2B SaaS companies. ECL’s flat fee structure and quick funding process make it an attractive option for SaaS businesses seeking fast and affordable access to capital - and makes competitively priced offers.

Additionally, ECL has its own $100M debt facility, meaning you’re not relying on outside investors. You’ll get funded through the same platform you applied to–with transparency on funding amounts, funding speed, and fees. 

Apply with ECL now

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2. Founderpath

Founderpath is a revenue-based financing provider that offers funding solutions for B2B SaaS companies. With a focus on helping founders grow their businesses without diluting equity, Founderpath provides funding based on a percentage of the company's annual recurring revenue (ARR). 

Services & Offerings

• Funding available within 9 days
• Flat fee structure based on the company’s revenue profile
• Serves B2B SaaS companies with $120K+ ARR

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3. Uncapped

Uncapped is a revenue-based financing and fixed-loan provider that offers funding solutions for e-commerce, SaaS, and subscription-based businesses. Uncapped can offer your business $50k to $10 million in funding by analyzing your company’s historical data. To apply, you’ll need at least six months of revenue history and an average annual revenue of $1.2M (unless you’re an Amazon seller). 

Services & Offerings

• Revenue-based financing up to $10 million
• Flat fee structure based on the company's revenue profile
• Serves e-commerce businesses with $120K+ ARR and SaaS/subscription businesses with $1.2M+ ARR

Read our full breakdown of Uncapped

Choose the Best Alternative to Pipe

When exploring revenue-based financing options for your startup, it's crucial to consider factors such as funding speed, cost, and flexibility. While Pipe offers a unique marketplace platform, this funding method leaves both Pipe–and its entrepreneurs–with little control over the funding process and prices. 

Fortunately, providers like Efficient Capital Labs can provide more competitive rates, faster funding, and a better overall fit for your business.

Efficient Capital Labs stands out for its private $100M debt facility, its ability to underwrite customers across all geographies, and its commitment to providing fast, affordable, and flexible funding solutions. 

If you're a SaaS startup looking for a reliable financing partner to help you scale, apply with ECL.

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