Ratio pockets $411 million in equity, credit for flexible subscription payment models • TechCrunch

Fintech start-ups Report secured $411 million in equity and debt financing to continue developing what it calls “a new flavor” of buy now, pay later that combines payments, predictive pricing, financing and process cash quote.

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

Srimal was previously founder and CEO of mobile sales assistant startup SmarterMe, while Blake was previously CEO of B2B legal marketplace UpCounsel, a company that came out on LinkedIn.

Their new funding includes $11 million in venture capital dollars raised in late 2021 and a $400 million credit facility for customer funding. Round investors include Streamlined Ventures, Matterhorn 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 flow, 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 customer wants the payments to be monthly or adjusted to the best way to pay, some companies cannot do that, they offer so 20% or 30% discount.

That’s where the credit facility comes in: Ratio makes discounts unnecessary by giving the SaaS company $1.2 million up front so it can offer more flexible payment options to its customers to meet to their cash flow needs.

“If you have better cash flow in December compared to the summer months, then you should be able to choose when to pay for the software,” Srimal told TechCrunch. “For SaaS vendors, they get initial capital for free and then can pass on some of the financing costs to their customers.”

Using this approach, Srimal believes SaaS companies can sell more and faster by deploying more repeatable offerings. Ratio’s machine learning technology also provides financial and behavioral data to tell providers if they are pricing their subscription tiers correctly and the likelihood of churn, lifetime value and willingness to pay.

Srimal says the seed capital approach has caught on and it already has “over half a billion dollars in business underway.” It has already funded over $5 million so far, and it expects that amount to grow to $30 million by the end of the year.

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

Meanwhile, the equity portion of the investment is dedicated to product development of the financial instrument, growth of the 10-person team and operations, Srimal said.

“The product roadmap is solid, and going forward, Ratio will grow in different facets and continue to meet the challenge of enterprise software billing,” Mason told TechCrunch.

Sallie R. Loera