Thread by @Jeff_Burke14

1/@pipe: The traditional venture capital disruptor

One month ago, @pipe raised a $50M series A from some of the biggest names in tech.

Here is my full breakdown of @pipe:

2/ The problem

High-growth companies need capital to scale rapidly.

Their options include:
A) Debt
B) Venture capital

Debt is not ideal. The structure is rigid, and interest expense compromises long-term cash

Most companies choose VC

3/ In the traditional VC model, founders raise capital in exchange for equity.

The model has been quite effective and is a contributor to the pace of innovation we see today.

But is that the only way?

4/ High-growth subscription models have two coveted attributes:
1) Predictable future revenue
2) High margins

Basically, these companies are steady, and they make a lot of money

Awesome

5/ Their main challenge: High Customer Acquisition Cost

It takes a significant amount of go-to-market / OpEx to get people to purchase.

Summary: It is expensive & challenging to get subscribers / customers, but once you do, it is very lucrative

6/ These companies need additional funding to acquire new customers (and scale).

Many investors are seeking opportunities to get a predictable return

@Pipe is building the online platform to connect these two groups

7/ Companies sell their future cash flow (to investors) in return for capital to scale.



Investors buy the recurring revenue (from companies) in exchange for a cash payment

No equity dilution for the founders

8/ Let’s use an example. Imagine Company PMF (Product-Market Fit) is growing rapidly. Their product is amazing, but they do not have the money to spend on the sales & marketing needed to scale.

So they go to a VC to raise a Series C, and the VC demands 20% of the company

9/ The founder and employees have already been diluted multiple times, so they say no. Not today. I am going to Pipe it!

10/ So they connect to Pipe.com and within 15 minutes, they identify a contract that is worth $100K per month.

They want to sell 12 months of this recurring revenue, and Pipe.com prices it at $1.1M (~$0.90-0.95 of par value)

All is good

11/ Except now, PMF realizes how quick and easy @pipe is. @pipe connects to their systems, so in real-time, they can value and assess their revenue.

They now have an agile and effective financing platform at their fingertips

12/ A quick (and simplified) look at timelines and incremental growth can show payoff periods for PMF

13/ As long as the investment can be used to drive incremental growth, then PMF should continue to sell future contracts.

If PMF is growing at 20%, it is easy to see how much value can be created if the OpEx investments can drive growth to 30%, 40%, or 50%

14/ So how big could this be?

Subscription models have exploded. If we think about both B2B (e.g., SaaS) and B2C (e.g., Birchbox) opportunity, then there is over $700B of TAM… and growing rapidly

Based of Pipe’s basic 1-2% transaction fee, this is $7-14B in revenue potential

5/ The team

The founding team consists of three experienced entrepreneurs: @harryhurst @joshmangel @zallarak

@harryhurst and @joshmangel previously founded Skurt together

6/ The investors

Seed: @craft_ventures , @DavidSacks (King of SaaS)
Series A: @jimpallotta13 , @alexisohanian , @chamath , @Benioff , @Shopify , @SlackHQ , @MichaelDell , @HubSpot

Notable @theallinpod exclusions: Dry-beak @Jason and @friedberg

17/ For more on @pipe, the full writeup can be found here:

jeffburke.substack.com/p/pipecom-the-…

18/ Total investment score

Short list for next write ups:

@ClementDelangue building an NLP at @huggingface
@Austen disrupting education at @LambdaSchool
@akashrnigam at @genies and their NFT oppty
@WillBruey @zebulgar space manufacturing at @vardaspace

Taking any suggestions and / or founder input!