On Wednesday, Los Angeles-based Pipe announced that it raised $60 million from investors, which includes equity and asset financing. This new funding comes as an extension to the company’s seed funding round, which raised $6 million just four months ago.
Many of the biggest tech companies base their business on selling software-as-a-service (SaaS) products. That includes Salesforce, Slack, Atlassian, Shopify, MailChimp and many, many more. Overall, the global SaaS market was worth $134.44 billion in 2018, and that number is expected to steadily grow.
But Pipe identified something that’s preventing the smaller SaaS startups from competing with the big leaguers. SaaS companies often make their money from customers that sign large contracts, and then pay in the form of monthly subscription payments. This is a steady stream of revenue, but often it results in a slower payout. So when a SaaS company inks a deal worth tens or hundreds of thousands of dollars, it may take a year or longer before they see all that money.
So Pipe built a platform that can leverage these customer subscriptions and provide an immediate payout. This means that SaaS companies get access to their money faster, which in turn they can reinvest immediately in order to grow faster and capture more customers.
Pipe was founded last September and launched in February of this year, but it says that it’s already seen “overwhelming demand” from early and growth-stage SaaS companies.
“We’re fundamentally changing the way SaaS companies fund their growth by treating their subscriptions as a new asset class. Through our financing platform, SaaS companies can turn their monthly and quarterly paid subscriptions into the up-front cash flow they need to grow,” co-founder and co-CEO Harry Hurst said in a statement. “We’ve invested in building the technology to make the process seamless and instant so that SaaS companies can focus on pitching customers, not investors.”
$60 million is unusually massive for a seed funding round, which usually help early stage companies get their business off the ground. Pipe says it will use the new funding to grow the company and expand into new markets, though a large chunk of this investment will be kept liquid so it can be used as payouts for Pipe’s SaaS customers.
With this new funding, Pipe also announced the appointment of Michal Cieplinski as chief operating officer and chief legal officer. Cieplinski previously worked at LendingClub as SVP and general counsel, and he brings years worth of experience holding managerial roles and finance and fintech companies.
“Pipe has the opportunity to re-shape the entire cloud services industry with a completely new approach to how companies are funded and grow,” Cieplinski said in a statement. “Pipe already offers a unique value proposition to the booming SaaS industry, but the vision is much bigger than the work Pipe is doing today. We’ve started with reimagining funding, but ultimately want to be a larger one-stop solution for SaaS services.”
