SaaSBOOMi, a community for software as a service (SaaS) companies in India, has launched an initiative to help startups raise unsecured working capital loans to better weather the economic downturn caused by the Covid-19 pandemic.
Manav Garg, founder and CEO of Eka Software Solutions, said SaaSBOOMi is partnering with non-banking finance companies (NBFCs) to make available revenue-based financing for SaaS startups. In the first phase, the community has partnered with lender Indifi, which has set aside about Rs 50 crore for eligible companies.
“We are bringing together startups and NBFCs and have come out with a model where we’ll enable revenue funding for SaaS companies,” said Garg. “This works with SaaS companies because they already have steady cash coming in.”
To be eligible, startups must have annual recurring revenue (ARR) of over $250,000; should have been in business for over 24 months, with proof for 12 months of recurring revenue and at least six months of stable revenue.
A fixed percentage of the revenue of startups that receive capital through the programme will go into repaying the loan over its tenure. The exact terms of the loan amount, repayment period and revenue contribution will be based on the negotiations between the startups and the NBFCs.
Apart from the capital, startups participating in the programme will also get mentorship from leading entrepreneurs in India’s SaaS community on where to invest, how to maintain revenue stability, and how to grow sustainably, at least for the next few quarters.
Garg said the capital will help startups weather increased churn, which on average has increased from 5% to 30%. “The idea is to help companies ride through this period of uncertainty and survive the next 12-18 months, after which I’m sure the funding and market situation will improve,” he said.
According to SaaSBOOMi, only 8% of SaaS companies in the country are venture-backed, making it extremely important for them to get other kinds of financial help to survive in the current crisis.
While horizontal SaaS players have seen lesser impact due to Covid-19, vertical players servicing sectors such as aviation, hospitality and offline retail have been more affected. However, players in the logistics and supply chain sectors have benefitted from the crisis.