Capchase, a provider of non-dilutive growth capital, is now in the buy now, pay later space after launching Capchase Pay to help software-as-a-service companies close deals faster.
Capchase Pay enables SaaS companies to collect the full contract value for their software while also providing their customers with flexible payment terms.
Though SaaS growth didn’t take as big of a hit as previously thought, Miguel Fernandez, co-founder and CEO of Capchase, told TechCrunch that SaaS companies did see a shift in their return on investment when sales cycles delayed as buyer’s asked for more flexible financing terms.
He called buy now, pay later offerings “one of the last B2B payment frontiers to be done in software.” Enterprise companies like Microsoft, SAP, Salesforce and Oracle are able to bring their own financing solutions to the table to help conversion, but it's still a nascent area for mid-market companies.
Those SaaS companies end up offering big discounts for upfront payments, which turn out to hurt revenue and impact retention after the first year when discounts aren’t expanded, Fernandez said. Capchase spoke to SaaS customers and found over 50% of them experienced an increase in sales cycle length and in customer payment delays, and almost 40% of companies increased their collection times as a result.
“We thought it was a perfect time to bring a product to market and accelerate conversion,” he said. “Vendors get all the cash upfront so they can continue to run the business and buyers can get flexibility in payments.”
Capchase Pay prepares quotes automatically and offers flexible payment options across bank accounts and credit cards. More than 20 SaaS companies signed on to use the product in the beta release with Capchase reporting these early customers experienced a 300% increase in sales velocity, an 80% increase in lifetime value and a 20% annual contract value increase.
One of them, CIENCE, a lead generation company, said that within one month of using Capchase Pay, it was closing deals in half the time, and grew its “pipeline from low, single-digit prospects for 12-month SaaS contracts to 50 with an average deal size of $100,000,” said August Keating, COO of CIENCE, in a written statement.
Fernandez said that offering a buy now, pay later product has also expanded Capchase’s user base. There was a typical cutoff for revenue-based financing customers having less than $30 million in annual recurring revenue. However, some of its early BNPL customers have hundreds of millions in ARR, he said.