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Fuse Three assists MarTech company to extend its cash runway with private debt capital

A UK MarTech company engaged specialist private debt broker Fuse Three to raise £1,500,000 in private debt capital to extend its cash runway.

The MarTech Company improves the way B2B sellers and customer facing teams communicate with their customers. 

 

Situation

Fuse Three’s client, a UK based MarTech company is achieving moderate growth, but is concerned about client concentration.

To solve the problem, the directors want to reduce the company’s monthly payments to extend its cash runway.

The company chose to work with Fuse Three because of its experience in raising private debt for B2B SaaS companies.

 

Objectives

  • To release capital to extend the company’s cash runway by refinancing existing debt

Outcome

  • Got term sheets on the table quickly and within the company’s timescales
  • Kept the management team’s workload as light as possible during the debt raising process
  • Helped the company to avoid being heavily diluted by the new capital it needed to keep it on its growth trajectory

 

About Fuse Three

Fuse Three helps fast-moving, disruptive and agile tech companies around the world to scale and grow by brokering specialist flexible private debt finance with minimum dilution.

Fuse Three arranges acquisition funding for RegTech SaaS company VoxSmart

B2B RegTech SaaS company VoxSmart engaged specialist private debt broker Fuse Three to raise £5,000,000 in private debt to enable the company to carry out an acquisition and to enhance the company’s working capital.

VoxSmart develops and distributes a multi-award-winning cloud-based communications surveillance platform to heavily regulated enterprises within the financial services sector.

The company is headquartered in London and has offices in Singapore, Madrid and New York.

 

Situation

VoxSmart’s directors identified an acquisition target, which has the potential of exploiting the substantial commercial and technological synergies between the two companies.

If successful, the acquisition will bolster the company’s product development capacity, revenue and customer base.

The company chose to work with Fuse Three to arrange acquisition funding because of its track record of sourcing lenders, structuring and closing such time sensitive transactions.

 

Objectives

  • Raise funds to meet acquisition costs
  • Raise funds to meet ongoing growth capital needs of the company

 

Results

Fuse Three successfully arranged a complex cross border transaction with many moving parts.

 

About Fuse Three

Fuse Three helps fast-moving, disruptive and agile tech companies around the world to scale and grow by brokering specialist flexible private debt finance with minimum dilution.

Fuse Three helps eCommerce company fund succession plans with private debt

A UK eCommerce company engaged specialist private debt broker Fuse Three to raise £4,000,000 in private debt to enable the company to carry out its succession plans.

The eCommerce company is a leading provider of luxury homewares. Recently the company expanded its operations outside the UK to Europe and the US.

 

Situation

 

Before exiting the business, the directors plan to fully equip the eCommerce company to deal with the challenges of the evolving digital retail market over the next five years.

To achieve their goals, the directors require capital to invest in sales and marketing.

In particular, the company wants to bolster its marketing team to reach untapped marketing channels. And invest in business resources, including upgrading its website, investing in content strategies, and improving stock control and inventory management systems.

The company chose to work with Fuse Three because of the brokerage firm’s experience of working with high growth tech and tech enabled companies.  

 

Objectives

 

Capital to assist the company with succession planning

 

Outcome

 

A successful arrangement of a complex transaction encompassing many moving parts including an equity raise, existing debt, inventory and a runway to breakeven

 

About Fuse Three

 

Fuse Three helps fast-moving, disruptive and agile tech companies around the world to scale and grow by brokering specialist flexible private debt finance with minimum dilution. 

Practical tips tech companies can take to maintain financial strength and stability

These are unprecedented times. What do you do when faced with the world grinding to a halt?

While CEOs and CFOs scramble to assess risks and take action to mitigate against short term scenarios, it is worth pointing out that planning for the long term will help keep you strong and stable.

You see when you plan for the long term; you keep your options open. Building a war chest helps you to deal with changes in the business environment.

Here are some practical steps you can take:

 

1. Be proactive in speaking to advisors about your options 

 

A specialist debt advisor knows which funds to approach to support your transactions. Better still can get options on the table to you fast.

 

2. Review your cash runway

 

Make sure your company doesn’t outrun its source of cash. Investigate options for temporary finance. Know that debt finance buys you time and gives you a protective ‘financial’ cushion so that you can get back on track.

 

3. Review your working capital requirements

 

Cash is king. Strong working capital helps you to stay resilient when faced with unforeseen circumstances such as a sudden decrease in sales revenues.

 

4. Review your business and resources 

 

Determine what cash you need to operate in a complex environment. Also, make sure you have the funding you need to hit the ground running when the world returns to normality. 

 

5. Look for opportunities to maintain and control your business

 

There’s no time like the present to remind yourself that business growth isn’t always linear. Make sure you have the funding you need to weather inflection points and make strategic pivots where necessary.

 

To sum up

 

The best advice we can give CEOs and CFOs of tech companies is to ready a war chest to help you through these uncertain times.

 

A specialist debt advisor can run through your options. Also, source the most appropriate lending partners and structure transactions so that you can confidently take steps to keep your company financially strong and stable.

 

As a result of your planning, you’ll give yourself options for:

  • Extending your cash runway
  • Keeping working capital flowing
  • Investing in business and resources so that you can hit the ground running when the market returns to normal
  • Having the financial strength to weather inflection points

 

I’m ready. Are you?

[Private debt for M&A datasheet] Looking for ways to fund your next acquisition?

Ifti – Founding Director of Fuse3

You know you need flexible funding to enable you to execute a time-sensitive transaction such as a merger or an acquisition.

But you also know that because of the nature of your tech business model – high in intellectual property and low in significant tangible assets, conventional lenders see you as a risk.

Sound familiar?

I’ve struggled with this problem in the past, too, when I set up and grew a B2G energy efficiency tech business. 

So what was the solution? 

Much research led me to the private debt market. Here I found lenders who actually understood my business and who were willing to support my growth by acquisition plans.

My experiences led me to found Fuse Three. Moreover, they’ve led me to create a Private Debt for M&A datasheet, designed to make you aware of another and more suitable funding option from which to choose. 

 

Key takeaways from this private debt for M&A datasheet

Our private debt for mergers and acquisitions datasheet sets out:

  • Why more and more tech businesses use non-dilutive, flexible private debt finance to grow and scale their tech businesses
  • How private debt finance for mergers and acquisitions works
  • How private debt finance differs from conventional debt lending
  • A mini case study showing how private debt for mergers and acquisitions works in practice

 

Why download my private debt for mergers and acquisitions datasheet

Over the last 15 years, I’ve started two companies. Sold one. Bought two and completed over 120 debt transactions.

Therefore, I’d like to share with you what I’ve learned. In particular, I’d like to make sure you’re aware of a fresh new approach to M&A funding, more suited to your business model and growth plans.

Click the datasheet image below to download as a pdf

M&A Datasheet

And finally

Of course, if you would like a little more guidance about funding options when planning your mergers and acquisitions strategy, then drop me a line, and we’ll set up a time to chat. 

How private debt smooths GovTech cash flow peaks and troughs

On the face of it, the burgeoning B2G market offers exciting opportunities for the GovTech sector.

Public procurement is the largest single marketplace across developing and developed economies, accounting for around one-fifth of global GDP.

Better still, Governments around the world actively encourage private-sector tech start-ups and SMEs to transform public sector services to make them more efficient, responsive and accountable.

But operating in the B2G market has its challenges. 

In this interview, Private Debt Finance Broker Ifti Akbar explains how appropriate funding can help GovTech entrepreneurs manage the lengthy sales cycles and uncertainty associated with awarding and starting public sector contracts.

 

1 . What challenges do companies operating in GovTech face?

Slow and unwieldy procurement systems, complex tendering processes and multiple decision-makers result in lengthy sales cycles.

 

As a result, GovTech entrepreneurs can expect pressure on their cash flows and high customer acquisition costs.

 

Beyond that, Government departments operate to a fiscal year, ending in April. 

 

Consequently, GovTech entrepreneurs need to overcome problems of cost overruns, lumpy revenues and potential pivots, customarily associated with seasonal businesses.

 

At the same time, GovTech entrepreneurs need to manage investor expectations.

 

2. Does political uncertainty also pose a problem?

Yes. We’re seeing the largest increase in public sector technology spending in decades. But ongoing uncertainty over Brexit and now a General Election means GovTech entrepreneurs experience delays in funding filtering from strategic projects through to programmes scheduled to start in 2020. Again, this puts pressure on cash flow and investor expectations.

 

3. How can private debt finance help GovTech entrepreneurs?

It very much depends on your use of funds and where your GovTech company sits in the business lifecycle. 

 

Pre-profit start-up companies burn cash. If cash flow is tight because of lengthy sales cycles, private debt finance can extend your cash runway to the next valuation. 

 

On the other hand, growth-stage companies that have secured sizeable public sector contracts can use private debt finance to scale their businesses to cope with increased demand while maintaining efficiency.

 

For instance, large contracts can demand the appointment of new talent ahead of the curve, a move to larger premises, or even new product development.

 

Mature GovTech companies can use private debt finance to fund acquisitions or buyout a shareholder. 

 

4. When should GovTech entrepreneurs start looking for debt finance?

It is always important to secure capital before you need it.

 

Why? Because securing capital before you need it puts you in a good negotiating position when government departments commence planning at the start of the fiscal year.

 

In addition to that, securing finance before you need it helps you to manage your cash flow through long enterprise sales cycles.

 

After that, towards the end of the fiscal year, government departments work hard to spend remaining budgets. So securing finance before you need it ensures you can capitalise on event-driven opportunities. 

 

Moreover, securing finance before you need it helps you to 

avoid problems associated with external pressures such as political and economic changes.

 

5. What experience do you have in GovTech/B2G? 

Before setting up Fuse Three, I, along with my co-founder Russell successfully built and sold a B2G energy efficiency company.

 

In doing so, we secured contracts with government departments at various levels, including local and central government and government agencies.

 

Of these included delivering energy efficiency programmes and software to the NHS, universities, police, Department for Education, local councils and the Home Office.

 

6. How do you see the GovTech/B2G market growing in the coming years?

Despite the challenges of running a GovTech business, we see enormous opportunities for entrepreneurs involved in HealthTech, Cyber Security, HR Tech, Cloud Computing, FinTech and Enterprise Software.

 

I read a statistic recently that told me spending on GovTech in Europe is €21.8bn, and that could grow five-times over in the years to come. 

 

7. How do you typically support your clients?

GovTech companies talk to us when they need funds to support them through enterprise sales cycles — also, growth finance, M&A finance and funds to enable international expansion.

 

You see, private debt finance specifically caters to the needs of GovTech companies, without diluting the equity of founders and existing investors.

 

8. Who makes up your GovTech client base?

GovTech is an area we know well and in which we have a lot of success. 

 

To secure funding, we can draw on our personal experience of growing a technology business supplying central and local government.

 

We understand our clients’ challenges. What’s more, we know the funders that want to lend into this space.

 

At present, our client base includes companies operating in HealthTech, Cybersecurity, Data Centres, Enterprise Software, Cloud computing and software development, and VAR’s.

 

For these companies, we have sourced, structured and negotiated loans including venture debt, IP secured lending, mezzanine finance, growth loans, acquisition facilities, bridge finance and shareholder buy-backs.

 

9. Do you see many UK focused B2G companies expanding internationally?

Yes. Upon successful contract completion, B2G companies often decide to replicate their success internationally.

 

To date, Fuse Three has funded international expansion projects in Asia, the US, Australia and the Middle East.

 

Where can people find you, Ifti?

 

You can connect with me on LinkedIn at: https://www.linkedin.com/in/ifti-akbar-7532014/ 

 

And finally

If you would like help smoothing your GovTech company’s cash flow peaks and troughs, also managing your investor’s expectations, then do get in touch. You’d be surprised by how easy it is to secure private debt finance.

How do SaaS Companies Achieve Growth With Debt Funding?

While no two SaaS companies are the same, there are always lessons to learn from the top performers on how they allocate their budget and how they prioritise that spend. At Fuse Three we regularly see SaaS companies seeking further growth and their use of debt funding for the best performers follows regular patterns.

Achieving SaaS growth with debt funding

 

Keep overheads down

Essentially how you spend boils down to your product, your size and your market. You want to find ways to lower your spend on cost of goods sold – from hosting, support, consulting, to third party software. The best performing SaaS companies that we have worked with are those spending less on overheads relative to their peers, this enables them to maximise their spend on activities which are growth focused.

 

Investing wisely – be customer focused to drive growth

The top performers reinvest the cash saved on overheads on those touchpoints that interact with the potential and existing customers directly: sales, marketing, customer success and product. Achieving high growth rates requires investment in customer acquisition. As we’ve discussed before, churn rates can dramatically impact the performance of your SaaS company. Investing in customer success to retain customers becomes just as important as client acquisition

Top performing SaaS companies, almost without exception, have competent and well funded
marketing departments.

 

Cost of Goods

If your product demands a high portion of spend, think of ways to streamline the product and reinvest those saved dollars back into growth. The top performers all have low COGS which they pump back into sales and marketing.

 

Top performing traits:

  • Customer success – top performers invest heavily into customer success, they win customers and keep them, maintaining low churn rates. They understand the importance of retention as they scale and the significance this has on revenue.
  • Invest in Marketing & Sales – reinvest as much as you can in your sales and marketing to drive user acquisition and increase your market share.
  • Economy of scale – those SaaS companies with above $10m in revenue achieve higher economies of scale in sales and marketing, this allows further focus on Customer Success which doesn’t benefit from scale in quite the same way.

 

The top performers know the true financial value of allocating budget on customer touchpoints, reducing churn and building a strong, long term customer base. Making use of debt funding to do so allows SaaS companies to achieve high growth without diluting ownership, maximising performance and future valuations.

How does venture debt financing work? A simple guide

Want to know more about venture debt financing?

Keep reading this guide, and you’ll find out exactly how venture debt can get your SME tech business to the next growth stage without diluting your equity or restricting you with loan covenants.

In particular you’ll learn:

  • What the term venture debt means
  • Why SME tech businesses use venture debt products
  • For what you can use venture debt
  • How venture debt differs from conventional debt finance
  • Why venture debt is a desired source of finance for growth stage tech companies
  • Why companies prefer debt over equity
  • What is cheaper, debt or equity?
  • Using venture debt for cross border transactions
  • Where you can find venture debt funders

Let’s get started:

A simple guide to venture debt financing

What does the term ‘venture debt’ mean?

Venture debt is a form of debt financing specifically designed to meet the needs of startup and pre-profit, high growth tech companies.

You can access venture debt as a stand-alone product or take it in complement to equity financing.

Often referred to as ‘risk capital,’ companies that use venture debt do so because they tend to lack tangible assets to use as collateral.

 

Is venture debt a short term loan?

A venture debt facility is typically structured over four years.  As a venture debt loan recipient, you can either service the debt and repay the full amount at the end of your loan period, or set up structured repayments.

 

Why would an SME tech business use a venture debt product?

If you’re a high growth tech business focusing on return on investment over the long term as opposed to short term cash flows and therefore prioritising growth over profit, then you need flexible growth capital to see you through to profitability.

 

For what can you use venture debt?

Venture debt fills in financing gaps when an SME tech business needs to:

  • Extend its cash runway
  • Manage a delay in releasing products
  • As a supplement to equity financing

 

How does venture debt differ from traditional debt financing?

First off, Venture debt funds often sit outside of the traditional bank ecosystem.

Independence and sector focus means venture debt funds can be responsive to the needs of early-stage growth companies.

Then there’s the source of the capital. Investors often include second-time entrepreneurs, keen to lend a hand to those following in their footsteps.

They’re comfortable that with the right finance, tech companies can navigate volatile periods and gain strength and stability.

Beyond that, it’s how venture debt investors look at loans.

Traditional bank lenders use a company’s track record of profitability and creditworthiness as underwriting criteria.

Whereas debt funds look for evidence that companies can repay loans from future equity and enterprise value (customer base, licenses etc.)

 

Why is venture debt becoming a desired source of finance for growth stage tech companies?

Despite your potential for scaling and making big profits, in the early years, bank lenders expect you to rack up losses. Consequently, they see you as a risk.

As a result, you can expect bank debt loans to come with restrictive covenants and demands for personal guarantees from board members and major shareholders.

In comparison, venture debt is covenant light.

What’s more, venture debt lenders can leverage intellectual property to raise funds.

Consequently, venture debt is ideal for filling the funding gap between equity rounds. And buying the time you need to reach milestones.

By the same token taking on venture debt decreases the need for follow-on funding.

And if that’s not enough, venture debt investors do not seek control of your business.

 

Why do companies prefer debt over equity?

Most attractive to board members is the fact that debt minimises equity dilution.

Then, it has an advantage as you can set it up quickly.

 

What is cheaper, debt or equity?

Debt is cheaper than equity, as lenders secure finance on assets.

Whereas, equity lives and dies with your company. Therefore equity investment is seen as a higher risk and more expensive.

Also, until you draw down funds, debt finance costs are limited.

 

Can you transact cross border venture debt?

Until recently, the finance sector has struggled to keep pace with Europe’s cross border culture.

Fortunately, venture debt fills the financing gap when scale-up companies want to sell into international markets.

As a result, venture debt has paved the way for a new market of cross-border facilities, offered alongside equity sponsored financing.

 

Where can you find venture debt funders?

Venture debt is available from specialist banks and private debt funds, globally.

In fact, Fuse Three works with funds across Europe, the US and Asia Pacific.

 

In short

If you’re a high growth company prioritising growth over profit, moreover, a company that needs time to reach your milestones. Also, a company that needs a healthy valuation to attract new investors for your next fundraising round, then consider venture debt as part of your capital stack.

The good news is it doesn’t have to be you who has to find the right venture debt partner to bring value to your business.

This calls for a debt fund broker.  

Find out more.

What your VAR CFO wished they knew about debt finance

Getting the right finance deal is crucial for VAR companies needing to raise funds to fuel growth or acquire companies.

But often VAR companies are hampered because they lack the security required by lenders when taking on traditional debt products.

But did you know that in addition to raising funds against traditional tangible assets, VAR companies can also leverage their intangible assets to get them to where they want to be?

Of course, most conventional lenders, do not take or really understand the the value of a VARs commercial assets or take them into consideration, when underwriting deals.

As a result, you waste time and money looking in the wrong places and talking to the wrong lenders.

Let me show you how to ensure you can find the right debt product and make the right decisions when taking debt.

 

Understanding the VAR business model

Traditional debt funds such as banks rely on company financial reports as a basis of their lending criteria. However, these do not give an accurate representation of a VAR company.

Consequently deals either fall-through, wasting time, or the company doesn’t get the best value from the debt they do take, wasting money.

What VAR companies need is a finance facility that takes into account assets such reoccuring revenue streams and patented products.

In 2018 we funded very successful VARs who were launching their own IP on SaaS models, growing and setting up operations in new territories either organically, via acquisition or moving their commercial model to pure annuity/subscription revenue model.

 

Understanding VAR assets

Every technology company has a speciality which is unique and specific to their business.

What VAR companies need is a lender that understands these intangible assets such as IP, and is capable of using them to leverage finance.

 

Finding the right business partner

Knowing there is the right debt finance solution in the market for VAR companies is one thing. Getting access to it is quite another.

Thankfully there is a solution.

A specialist debt finance broker makes it his business to build relationships with debt funds. And can scan the market quickly to find the best debt fund partner for your business.

 

To sum up

To fuel your business growth or to raise the funds you need to acquire another business, you need to find a debt finance partner that understands

  • Your business model
  • Your assets (tangible and intangible)
  • Has strong relationships with alternative debt funds

To get the debt finance you need for your VAR business, it pays dividends to have conversations early.

So get in touch with a debt finance broker such as Fuse 3.

Trust me, you’ll be glad you did.