Understanding Revenue-Based Financing as an Investment Alternative

Not every startup needs—or wants—venture capital. As founders explore alternatives to equity dilution, revenue-based financing (RBF) has emerged as a flexible, founder-aligned funding option. And for investors, RBF offers predictable returns without waiting for an exit.

This blog breaks down how revenue-based financing works, when it makes sense, and what both founders and investors should consider before pursuing it.

What Is Revenue-Based Financing (RBF)?

RBF is a form of non-dilutive capital where investors provide funding in exchange for a percentage of a company’s future revenue until a predetermined return cap is met.

Key characteristics:

• No equity is exchanged

• Repayment is tied to revenue performance

• Typically repaid monthly as a percentage of top-line revenue

• Repayment cap often ranges from 1.3x to 2.5x of the original investment

Why Startups Choose RBF

1. Non-Dilutive: Founders retain full ownership and control.

2. Flexible Repayment: Payments adjust with revenue—low in slow months, higher in strong months.

3. No Board or Governance Rights: Investors do not take seats or influence strategy.

4. Fast Funding Process: RBF is often faster and more data-driven than equity rounds.

Ideal Candidates for RBF

• Recurring Revenue: SaaS, subscription, or e-commerce with stable MRR

• Positive Unit Economics: Businesses where growth capital will drive predictable ROI

• Growth-Stage: Companies that need working capital but are not ready (or do not want) a priced equity round

Investor Considerations

• Return Cap: Returns are capped, so upside is limited compared to equity

• Risk Profile: There is no ownership, so in a default scenario, recovery may be limited

• Cash Flow Visibility: Best for startups with reliable revenue and clear reporting

• Deal Volume: RBF funds often rely on volume and portfolio diversification

Common RBF Structures

• 6%–12% of monthly revenue until 1.5x–2.0x is repaid

• Monthly payments fluctuate based on revenue performance

• Some structures include minimum payments or covenants

Platforms and Players

• Pipe – Trading recurring revenue for upfront capital

• Capchase – Non-dilutive capital for SaaS businesses

• Lighter Capital – RBF for early-stage tech startups

• Clearco – RBF for e-commerce and DTC brands

• Founders First – Focus on underserved founders and service-based businesses

Raziel allows investors to track RBF deals alongside equity investments, compare return multiples, and monitor revenue repayment schedules.

With Raziel, you can:

• Tag RBF vs equity deals in your portfolio

• Visualize repayment timelines and cap progress

• Benchmark IRR across capital structures

• Track capital efficiency by comparing outcomes across funding types

This brings structure to a non-traditional but increasingly popular asset class.

RBF as a Strategic Alternative

Revenue-based financing is not a replacement for venture capital—but it is a powerful alternative for the right company at the right stage.

For founders, it means retaining control. For investors, it means steady returns tied to real-time performance. As the capital stack evolves, understanding RBF is no longer optional.

With Raziel, investors can integrate RBF deals into their portfolio strategy—tracking returns, risk, and revenue with clarity.