In a recent interview, Zahra Alubudi, Co-Founder and COO of Levenue, delves into the innovative approach of Europe's largest revenue-based financing marketplace. Levenue connects companies with recurring revenues to institutional investors, offering a unique and impactful solution in the fintech landscape.
By allowing SaaS tech companies to monetize future cash flows and providing investors with short-term exposure and attractive fixed rates, Levenue stands out in a competitive market.
Zahra explains how Levenue's data-driven process ensures quick and cost-effective financing for founders without compromising equity, addressing traditional funding challenges and opening new opportunities for sustainable growth.
Gresheen (GG) Libby: Zahra, with the market for traditional venture capital being increasingly competitive, how can founders leverage revenue-based financing (RBF) to meet their immediate capital needs without sacrificing equity or control of their companies?
Zahra Alubudi: The process is fairly straightforward. Levenue provides a capital injection without compromising the equity. Our process is data-driven, and to perform a financial analysis, we need three data sources, which we internally call the sources of truth. Levenue will need to collect these data points to provide a trading limit: accounting data, which founders can connect via APIs or by providing us with monthly P&L and balance sheets in CSV or Excel format; banking data, which founders share through our APIs directly with "view-only" access to extract the last 12 months of data, allowing connection with multiple bank accounts; and subscription/revenue data, which founders can either connect via our APIs or send in CSV/XLS format.
Gresheen (GG) Libby: What are the primary advantages of revenue-based financing compared to other alternative funding methods, such as traditional loans or equity financing? Are there any particular challenges that founders should be aware of when opting for RBF?
Zahra Alubudi: Levenue offers tech SMEs fast access to capital without equity dilution for founders and without requiring traditional collateral such as personal guarantees; the only collateral is future revenue. Unlike a loan, Levenue's financing is considered deferred revenue, providing a flexible and accessible funding solution.
Levenue addresses financing gaps without requesting equity dilution or requiring collateral. By leveraging SaaS or subscription-based companies’ future revenues as assets, it offers a highly competitive alternative to traditional loans or equity financing.
Another advantage of Levenue for eligible business founders seeking funding is that the solution is not regarded as a loan, but is categorized as deferred revenue in accounting. The company and the investor enter into a revenue purchase agreement. Essentially, the company sells a portion of its revenues to an investor for a 12-month period (at a discount) in exchange for an immediate injection of capital. This is exactly like annual subscriptions offered by companies to their clients: an upfront payment (often with a discount) before the service is provided. This is a crucial element of accrual accounting, ensuring revenue recognition occurs as it is earned.
With Levenue, the company receives the money upfront for the future incoming revenues.
These deferred revenues are classified as working capital.
Gresheen (GG) Libby: One of Levenue's standout features is the ability for founders to access finance in as little as 48 hours. Can you elaborate on how this process works and what makes it so efficient compared to traditional funding routes?
Zahra Alubudi: The process is extremely streamlined. Companies looking for financing need to sign-up to our platform and connect/upload their bank account, accounting details and revenue data. This usually takes 15 minutes.
We then perform a financial analysis where we analyse different metrics such as churn rate, net growth, and runway. We will then provide a "trading limit." This is the maximum funding amount sanctioned by Levenue to the company, which is usually 30 to 45% of the company's ARR. Within 48 hours, the company will be able to start trading on our platform. It is at the company's discretion how many of their subscribers they will trade for upfront capital. Investors will then bid in a Dutch Auction for the offered contracts.
Gresheen (GG) Libby: What are the benefits for investors with Levenue?
Zahra Alubudi: We work with select, accredited investors, who have compelling reasons to deploy capital with Levenue.
They benefit from short-term exposure, as contracts are purchased for a fixed 12 month term, straight line amortising and not in a 'bullet'. Indemnification is made via SEPA Direct Debit Mandate. An important aspect is that Levenue provides risk mitigation mechanisms that investors value. Levenue has developed proprietary de-risking mechanisms, in addition to constant monitoring of API connections to meaningfully reduce downside risk.
And last but not least, Levenue ensures attractive fixed rates, a crucial element in volatile contexts. Our investors have experienced strong risk-adjusted returns, as IRR sits at ~23% net of fees, with enviably low late payments and zero loan loss events since inception.
Gresheen (GG) Libby: Do you believe revenue-based financing could be a viable solution to addressing the gender funding gap in the tech industry? Have you seen any trends or data that suggest RBF is more accessible or appealing to female founders?
Zahra Alubudi: Absolutely. Levenue financing marketplace is data driven only. We assess eligibility based on financials only. Investors on the platform are only able to see financial information, no other information on the founder such as name, age, gender etc. Therefore, investment decisions are less exposed to influence from soft factors, such as presentation skills, perception, or bias.
Gresheen (GG) Libby: From your experience, how time-consuming and energy-draining is the process of raising funds through traditional means in the UK and Europe? How does Levenue aim to mitigate these challenges for founders?
Zahra Alubudi: Traditional fundraising, whether through loans or equity, often involves a lengthy process of preparation, pitching, negotiations, and due diligence. This process will last a minimum of 3 months. In my experience, the time and energy spent on fundraising can distract founders from focusing on core business operations and growth strategies.
Gresheen (GG) Libby: Looking ahead, what are Levenue's plans for expanding its services or geographic reach? How do you envision the future of results-based financing evolving in the next few years?
Zahra Alubudi: When I co-founded Levenue together with our CEO Ben Rieder in 2021, our goal was to fill a huge gap in the market for both investors and tech founders: we help investors diversify their portfolios and achieve superior returns, and we help SaaS companies use the forecasted cashflow of their existing subscriptions as collateral for non-dilutive financing
To date, Levenue has enabled investors to provide 750+ tech startups with over €450 million in total financing. Up to now, the largest ticket on the platform has been €4.6 million, with the smallest € 53k - so there is really a lot of opportunity for both startup founders and investors of any profile, size or risk profile.
We currently operate in 16 countries across the EU. Our next milestone will be to open up the Italian, French and Spanish market. In the long-term, we are looking to become a global RBF marketplace and open up a wealth of opportunities for both investors and tech founders to grow sustainably.
