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Ratio delivers $411 million in equity, credit for flexible subscription payment models • londonbusinessblog.com

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Fintech startup Ratio has raised $411 million in equity and debt financing to continue developing what it calls “a new flavor” of buy now, pay later, which combines payments, predictive pricing, financing and a quote-to-cash process .

Co-founder and CEO Ashish Srimal co-founded Ratio in 2021 with CTO Mason Blake, and they’ve been working on the company’s concept ever since, which is to help SaaS and technology companies leverage the $1.5 trillion subscription market for recurring income.

Srimal was previously founder and CEO of the mobile sales assistant start-up SmarterMe, while Blake was previously CEO of the legal B2B marketplace UpCounsel, a company that switched to LinkedIn.

Their new financing includes $11 million in venture dollars raised in late 2021 and a $400 million credit facility for customer financing. Investors in the round include Streamlined Ventures, Cervin Ventures, 8-Bit Capital, HoneyStone Ventures and a group of individual investors.

When deploying subscription-based business models, SaaS companies often face challenges such as deferred cash flows, discounts, and time to recoup customer acquisition costs. For example, Srimal explained that if a company signs a contract for $1.2 million, but the client wants the payments to be made monthly or adjusted according to how best to pay, some companies can’t, so they offer a 20% or 30% discount.

That’s where the credit facility comes in: Ratio eliminates the rebates by giving the SaaS company $1.2 million upfront so they can offer their customers more flexible payment options to meet their cash flow needs.

“If you have better cash flow in December than in the summer months, you should be able to choose that time to pay for the software,” Srimal told londonbusinessblog.com. “For SaaS sellers, they get free upfront capital and can then pass on some of the financing costs to their customers.”

Through this approach, Srimal believes that SaaS companies can sell more and faster as they deploy more repeatable offers. Ratio’s machine learning technology also provides financial and behavioral data to inform vendors about the appropriate pricing of their subscription tiers and likelihood of churn, lifetime value, and willingness to pay.

Srimal says the initial capital approach has caught on and that it “already has more than half a billion dollars in business in the pipeline”. It has already funded more than $5 million to date and he expects that to grow to $30 million by the end of the year.

In addition to its heavily booked pipeline, the company grew 10x in annual recurring revenue between the first and second quarters of 2022, following its official launch earlier this year.

Meanwhile, the equity of the investment will go towards the product development of the financial instrument, the growth of the team of 10 and the operations, Srimal said.

“The product roadmap is strong and going forward, Ratio will expand into different facets and will continue to meet the challenge of enterprise software billing,” Mason told londonbusinessblog.com.

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