Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / How Bull Markets Are Creating Revenue-Based Financing Boom
Transcript
- Lucas: So it's July 10, 2026. The S&P 500 is sitting at 7,567, up about 0.4 percent in the last five days. But the Russell 2000, the small-cap index, is down 1.2 percent over the same stretch. There's a divide in this bull market. Luna: Yeah, the big tech names are carrying the load again. But I want to talk about something happening beneath the surface that's actually pretty interesting for startups and growth companies. Lucas: What's that? Luna: Revenue-based financing. It's been around for a while, but it's really taking off in this environment. Think of it as a loan where repayment is tied to a percentage of monthly revenue, not a fixed schedule. Lucas: Right, and it's particularly big in the SaaS world. Companies like Pipe have built entire platforms around it. Pipe lets a software company sell its future subscription revenue — basically, you get a lump sum today in exchange for a slice of your monthly recurring revenue over time. Luna: Exactly. And the key selling point is that it's non-dilutive. Founders don't give up equity. In a bull market where valuations are high but dilution still hurts, that's a powerful pitch. Lucas: It's also a response to the venture capital slowdown we saw in 2023 and 2024. VCs got pickier. The average time between rounds stretched out. So companies that needed growth capital started looking for alternatives. Luna: And now, with the bull market in full swing, there's more liquidity chasing these alternative lending products. Pipe itself has facilitated over two billion dollars in transactions. It's not small anymore. Lucas: Two billion is significant, but let's put it in context. The total venture capital market in the US is still around 150 billion a year. So RBF is a fraction of that. But it's growing fast — compound annual growth rate of about 30 percent over the last three years. Luna: And it's not just SaaS. We're seeing it in e-commerce, direct to consumer brands, even some biotech companies with predictable revenue streams. The common thread is recurring revenue. Lucas: The structure is interesting. Typical terms: a company might sell one to five times its monthly recurring revenue in exchange for a repayment cap of 1.2 to 1.5 times the advance. So if you get $200,000, you might repay $260,000 over time. The effective interest rate depends on how fast you grow. Luna: Which means the faster you grow, the cheaper the capital. That's a big incentive. Lucas: And a big difference from traditional debt. Banks want fixed monthly payments. If you have a slow month, you still owe the same amount. With RBF, if your revenue dips, your payment dips. It's flexible. Luna: That flexibility is why a lot of founders prefer it over a bank loan. And it's also why investors are getting interested. Some institutional investors are starting to allocate to RBF funds as a fixed-income alternative. Lucas: If today's conversation gave you a clearer picture of how companies are funding growth without giving up equity, that's the kind of insight our listeners tell us they value. And the way we keep this show ad-free and focused is listener support. If you found this useful, you can buy us a coffee at buy me a coffee dot com slash fexingo. It helps us keep digging into these angles. Luna: Yeah, honestly, it's a small way to make sure we can keep covering the stuff that actually matters, not just the headlines. We appreciate it. Lucas: So back to RBF — one thing I find compelling is how it changes the incentives for a founder. With venture capital, you're incentivized to grow as fast as possible, even if it's unprofitable, because you're playing for a big exit. With RBF, you're incentivized to grow profitably, because every dollar of revenue reduces your repayment. Luna: It aligns with capital efficiency. And in a market where the S&P is up but small caps are lagging, efficiency matters more than ever. Lucas: Let's look at a real example. Take a hypothetical SaaS company with $100,000 in monthly recurring revenue. It's growing at 5 percent month over month. It wants to invest in sales and marketing. It could raise a seed round — give up maybe 20 percent of the company — or it could get $300,000 through Pipe with a repayment cap of 1.3 times. Luna: If the company keeps growing at 5 percent per month, it might repay that $390,000 in about 12 to 15 months. Then it owns 100 percent of itself, and it's still growing. Lucas: Compare that to a venture round. You give up 20 percent. If the company is later valued at $50 million, that 20 percent is worth $10 million. That's a huge cost. RBF avoids that entirely. Luna: But there's a trade-off. RBF is capped. So if the company becomes a massive success, the VC who took equity gets a huge return. The RBF lender just gets their 1.3 times. That's the ceiling. Lucas: Right, it's a debt-like return. So it's not a replacement for venture capital for companies aiming for a billion-dollar outcome. But for the vast majority of startups that are building sustainable businesses — not unicorns — it's arguably a better fit. Luna: And the market is noticing. We're seeing more RBF providers: Pipe, Capchase, Wayflyer, Lighter Capital. They're all competing on terms and speed. Pipe's platform can approve a company in days, not weeks. Lucas: That speed matters. In a bull market, opportunities don't wait. If you need capital to ramp up ad spend before a product launch, waiting two months for a VC term sheet could mean missing the window. Luna: Exactly. And I think that's why RBF is particularly well-suited to this market. The bull market creates urgency — you want to move fast. But it also creates a lot of noise. RBF lets you move fast without the distraction of a fundraising roadshow. Lucas: There's another layer. As RBF grows, it could start to compete with venture debt. Venture debt is typically offered by banks like Silicon Valley Bank. It's also non-dilutive, but it usually has warrants attached — meaning the lender gets a small equity kicker. RBF generally doesn't. Luna: So RBF is cheaper in terms of dilution, but the interest rate equivalent can be higher. It's a trade-off. But the simplicity is appealing. Lucas: I want to bring this back to the macro picture. The bull market we're in is being driven by a handful of mega-cap tech stocks. The S&P 500 is at an all-time high, but the average stock is not. That's creating a bifurcation. Luna: And that's where RBF becomes even more relevant. Small and mid-cap companies that are being overlooked by public market investors still need capital to grow. RBF gives them an alternative to going public or selling out. Lucas: Exactly. The Russell 2000 is down over the past week. Those companies aren't getting the same love from the stock market. So they're turning to private capital markets, and RBF is one of the most efficient tools. Luna: It's also interesting to think about the risk. If a company takes on RBF and then hits a rough patch, the repayment adjusts downward. That's good for the company. But for the lender, it means cash flows are variable. That's why RBF lenders underwrite carefully — they want companies with high gross margins and low churn. Lucas: The ideal RBF candidate is a SaaS company with gross margins above 70 percent and monthly churn below 2 percent. Those metrics give the lender confidence that revenue will be there to repay. Luna: And that's exactly the kind of company that's thriving in this bull market. So in a way, RBF is a bet on the same high-quality recurring revenue that the public markets are rewarding. Lucas: It's a feedback loop. The bull market makes RBF more attractive because companies are growing faster and have more predictable revenue. That growth makes RBF lenders more willing to lend. And the capital they provide fuels more growth. Luna: Until the cycle turns. If the economy slows and revenue growth decelerates, RBF could become a burden. Payments would still be a percentage of revenue, but if revenue contracts hard enough, the absolute dollar amount might still be painful. Lucas: That's the risk. But for now, in July 2026, with real GDP growing at 2.1 percent and the Fed holding rates steady around 3.6 percent, the conditions are favorable. RBF is a product built for this environment. Luna: And it's not just for startups anymore. Some larger private companies with steady revenues are also using it. It's becoming a legitimate asset class. Lucas: I think the key takeaway is that the bull market isn't just about stocks going up. It's about the infrastructure that supports growth. Revenue-based financing is a piece of that infrastructure, and it's quietly reshaping how companies fund themselves. Luna: It's a reminder that innovation in finance doesn't always come from Wall Street. Sometimes it comes from a platform that helps a SaaS company turn its monthly invoices into growth capital. Lucas: And that's the kind of market evolution we'll keep watching. How do you see RBF evolving if the Fed starts cutting rates later this year? Luna: If rates drop, traditional debt gets cheaper. That could put pressure on RBF's value proposition. But I think the non-dilutive aspect is so powerful that it'll maintain a strong niche. Plus, the flexibility of variable payments is something banks don't offer. Lucas: Fair point. So RBF isn't just a bull market fad. It's a structural change in how growth is financed. Luna: Exactly. And we'll see how it plays out.