STARTUP LENDER -- Cash For SaaS
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[June 18, 2007]

STARTUP LENDER -- Cash For SaaS

(Information Week Via Thomson Dialog NewsEdge) Software as a service is the hottest business model for startups, but that doesn't mean bankers are keen to lend to them, given their asset-light approach and relatively new model. That has sparked a new company called SaaS Capital to try to make a business lending to this new class of startups, using monthly subscription contracts as collateral.



Todd Gardner, a former venture capitalist with Blue Chip Venture, secured $2.3 million in funding from Blue Chip and two other venture firms, plus access to bank debt of $10 million. SaaS Capital expects to charge about 14% interest, lending up to 30% of the value of contracts a company has in hand.

Knowlagent, a small supplier of call-center management and training software, is negotiating with SaaS Capital as it moves from traditional licensing to SaaS. CEO Rusty Gordon hasn't been able to get a loan elsewhere, since bankers wanted conventional software licenses that deliver a big up-front payment, or fixed assets to lend against.



SaaS Capital's plan has another wrinkle-a promise to keep the subscription app running if the vendor goes out of business. Gardner thinks customers need that assurance, since the buyer doesn't have the code or its own data if a vendor fails.

At 14%, SaaS Capital's cash isn't coming cheap. But it may be a more palatable option for a startup than signing over a jumbo chunk of equity to a venture capital company.

http://informationweek.com/

Copyright 2007 CMP Media LLC. All rights reserved.

Copyright 2007 CMP Media LLC

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