Not every SaaS company looking for growth capital needs to raise venture capital or sell part of the business.
That may sound obvious, but in practice, most founders think in fairly binary terms: either you bootstrap until cash flow allows you to grow, or you bring in investors. When I recently sat down with the team at Ned Fund to discuss our partnership, it became clear that there’s a third route that deserves a lot more attention.
Ned Fund doesn’t invest in companies. Instead, they finance recurring contracts.
That may sound like a subtle difference, but it fundamentally changes how founders can finance growth.
Financing contracts, not companies
Traditional lenders typically look at assets. Venture capitalists look at your future potential in exchange for equity. Ned Fund starts somewhere entirely different: your contracted recurring revenue.
Their approach is surprisingly simple.
If you’ve signed a customer on a multi-year subscription, a large part of that future cash flow is already contractually secured. Instead of waiting months or years for those subscription payments to come in, Ned Fund allows companies to monetize a significant part of those future cash flows upfront.
The result? More working capital to keep selling, implementing and growing, without giving up ownership.
AI is making hardware interesting again
One of the more interesting parts of our conversation wasn’t actually about financing.
Over the past year we’ve seen an interesting shift in SaaS. As AI lowers the barriers to building software, founders increasingly have to think about defensibility. If your product is little more than a workflow wrapped in a dashboard, it’s becoming easier than ever for competitors (or even customers themselves) to recreate parts of it.
Ironically, this is making hardware-enabled SaaS businesses more attractive again.
A company selling IoT sensors, connected devices or other hardware together with subscription software often has much stronger customer lock-in. Replacing those systems is expensive, operationally disruptive and therefore unlikely. The software becomes deeply embedded in the customer’s operations.
Ned Fund is one of the financing partners embracing that shift.
Unlike many traditional financiers, they’re perfectly comfortable financing subscription businesses that combine software with hardware, as long as the underlying contracts are solid.
Not every subscription is financeable
Of course, not every SaaS company qualifies.
Ned Fund focuses exclusively on Dutch B2B businesses with recurring contracts that have a fixed term, predictable monthly payments and contractual transferability. Monthly cancel-anytime subscriptions generally don’t fit the model.
Interestingly, their due diligence also looks very different from what founders are used to.
Rather than spending months valuing the company itself, the primary questions are much more practical:
- How reliable is the contracted cash flow?
- How much ongoing service is still required to fulfil the contract?
- How financially stable is the customer?
The less service required after the sale, the larger the portion of future revenue that can potentially be financed today.
A different way to think about growth
One insight I hadn’t considered before is how flexible this model can be.
The obvious use case is funding growth without dilution.
But it can also help founders who don’t necessarily want to sell their business, yet would like to unlock capital for new investments. In some situations, it can even play a role in acquisition financing, where recurring contracts become part of the funding structure behind buying another business.
It’s not a replacement for venture capital or private equity.
It’s simply another tool founders should understand before deciding how they want to finance the next stage of their company.
What this means for our community
One of the reasons we’re excited to welcome Ned Fund as a We Love SaaS partner is that they broaden the conversation around growth capital.
Not every founder wants outside shareholders. Not every company fits the venture capital model. And not every business should.
For founders with predictable recurring revenue, especially those operating with longer-term B2B contracts, it’s worth understanding that there are more financing options available than simply raising equity.
If you’re building a SaaS or subscription business and you’re exploring ways to finance growth while keeping ownership of your company, Ned Fund is definitely worth getting to know.
