September 29, 2021
Pipe is here to fill a financing gap for UK founders
I left the UK for the United States seven years ago to build my first technology company, Skurt. At that time, the funding environment in the U.S–with its robust VC environment and its well-developed ecosystem for first-time founders in need of capital–made it easier to build the kind of business I wanted.
The UK is now in the midst of its biggest start-up boom in recent years and seeing major growth in the tech space. And I'm excited to share that Pipe is now available in the UK to help companies grow on their terms.
The changing landscape
The UK is a well-established economic leader and entrepreneurial hub. It's home to a great number of both traditionally VC-funded and bootstrapped businesses—brought to life by a growing community of innovative founders who've delivered companies like GoCardless, Revolut, and Checkout.com to national and global stages.
While the UK's entrepreneurial community has access to some of the most storied banks in the world, the VC ecosystem in the UK is still taking shape. Many founders bootstrap or take on loans for their businesses as they explore product-market fit and build their customer base. And while VC funding is standard fare for US founders getting started, only a tiny percentage of UK startups have access to venture capital. In fact, the UK government counted over 660,000 companies founded in the year-ended March 2020—more than a startup per minute. Data on PitchBook indicates only 2,200 UK companies—or 0.3% of that total—raised a first VC round during that same period.
Once a business is up and running, there's been a funding gap for founders trying to scale—especially those without access to VC funds. Many of these startups are in a race against the clock toward profitability. Without alternative financing options, they can also find themselves targeted by predatory lenders. This is why we started Pipe: If your company has a baseline of repeatable growth, you shouldn't have to dilute yourself—or your employees—or take on restrictive loans to scale. Pipe has been filling this gap for US founders, and can now do so in the UK, as well.
When founders need outside capital to finance growth, they typically leverage equity or loans or they self-finance. The former are stalwart but often slow-moving, inefficient ways to fund a company. The latter is quite popular in the UK, but not an option for everyone. No matter how you've chosen to finance your business, with the economy moving as fast as it is today, founders need another option to match pace.
Although traditional financing and bootstrapping can be excellent ways to get your idea off the ground, if they're the only tool in your tool chest they can be limiting when you want to move quickly. It can be difficult to take advantage of pivotal opportunities to grow your business if the capital needed to fund that growth is not in hand when you need it.
Loan financing can take anywhere from 3-6 months to line up—and equity, which can be difficult to access in the UK, can take even longer. Bootstrappers may have greater flexibility, but without sufficient personal funds, you may still have to wait for cash to roll in before you can hit your next milestone.
These scenarios can be truly frustrating and can hold back your business's growth. Enter Pipe.
For founders who want to move more quickly, Pipe provides an alternative that works harmoniously with however you've chosen to fund your company so far. Pipe connects you with the capital you need to scale based entirely on the health of your company and your recurring revenue streams. No need to empty your bank account, give up control or ownership, or shackle yourself with loan covenants.
Unlocking a new asset class
In recent years, everything from cars to software to picking up a few groceries at the market has shifted from one-off transactions to recurring models. SaaS and direct-to-consumer goods to scooter rental subscriptions, online pharmacies for prescription refills, and even furniture and camping gear rentals—are becoming a ubiquitous part of life. We can sign up to get whatever we need exactly when we need it, which gives many companies consistent and predictable recurring revenue cash flows.
Those revenue streams are a new kind of asset, generating a very stable economic benefit for a company. Customers may commit to a year or even multi-year subscription, often with fairly low churn rates. The only trouble is that recurring revenue tends to trickle in over time (like monthly subscription fees, for example). What happens if you need capital up front to scale your business or to take advantage of a limited-time opportunity like a merger or acquisition?
Pipe unlocks your recurring revenue and allows you to pull it forward for up-front cash when you need it. Pipe isn't a lender—it's a trading platform connecting you with institutional investors that bid on your revenue streams based on the fundamental health of your business.
Pipe connects securely to your accounting, bank, and payment processor giving you access to the highest possible trading limit. Pipe's buy-side investors are willing to provide capital at a very low cost because they truly believe in your ability to create revenue as you scale. (And your data—which is fully anonymized and secure—proves it.)
Typical bid prices are between 92–98 pence on the pound and get even better as you build credibility with successful trades. For example, you could trade £100,000 in annual recurring revenue for £95,000 up front today. Once you securely sync your accounts with Pipe, you could see that up-front capital in your bank in as little as 24 hours of being connected.
What does that mean for your growing business? It means you can grow on your terms without unnecessary dilution or restrictive debt. It can also work alongside traditional financing to maximize your profitability and cash flow and help you retain control over how you scale your business.
It's good to be home
Traditional debt and equity financing both have their place in a founder's toolbox, and I believe they always will. I'm an equity investor myself, and I don't expect that to change any time soon.
For founders in the UK, Pipe can now be the ace up your sleeve as you leverage recurring revenue for up-front capital quickly and flexibly. Pipe can provide ongoing capital exactly when you need it to scale on your terms.
Thanks for reading,
Pipe Technologies Inc.
Disclaimer: Pipe and its affiliates don't provide financial, tax, legal, or accounting advice. What you're reading has been prepared for knowledge-sharing and informational purposes only. Please consult your financial and legal advisors to determine what transactions and decisions are right for you and your business.