Yahoo Finance The 'Nasdaq' for trading recurring revenue gets backed by Benioff, Palihapitiya, Shopify
MIAMI, Fla. — Pipe Technologies, the one-year-old platform for companies to trade monthly recurring revenue for upfront annual revenue from yield-seeking buy-side investors, announced a strategic financing round on Tuesday consisting of a who's who of individuals and companies to fuel the company's global expansion.
The $50 million strategic equity funding, led by Siemens Next47 and Jim Pallotta's Raptor Group, includes Shopify (SHOP), Slack (WORK), HubSpot (HUBS), Okta (OKTA), Chamath Palihapitiya, Marc Benioff, Michael Dell's MSD Capital, Republic, Alexis Ohanian, and Joe Lonsdale.
While many press releases often tout the number raised in a financing round, this one intentionally excluded that figure in the headline. The round also excludes traditional venture capital investors and instead features a handful of publicly-traded companies and individuals.
"We worked really hard to get this amazing group together. This was not a traditional financing. We've been very intentional. It's not about the number. We don't even need the money. We have five or six years of runway going into this," Pipe's co-founder and co-CEO Harry Hurst told Yahoo Finance.
Hurst explained that Pipe's focus is on "who's coming to the table" and who is "aligned with the mission of building a healthier ecosystem and helping companies to grow."
"So for us, this was just about putting together a highly strategic consortium of individuals and publicly-traded companies that had this huge ecosystem of millions of customers that not only are we now one-degree separation from but, more importantly, we're just super aligned in the missions with all of these companies," he added.
The 'Nasdaq for revenue'
Pipe, which relocated to Miami from Los Angeles in September, allows companies to trade their monthly recurring revenue (MRR) for annual recurring revenue (ARR) cash flow to finance growth without debt or dilution. The company launched in beta in February 2020 and opened its floodgates that June. Pipe has already garnered more than $1 billion in tradable ARR, with more than 3,000 companies signed up for the platform.
"We're building the Nasdaq for revenue," Hurst said, a reference to the stock exchange.
In other words, Pipe built a trading platform for a new asset class — recurring revenue — in which companies can trade their recurring revenue streams for upfront capital from institutional investors in real-time. Institutional investors like banks, hedge funds, pension funds, and insurance companies compete against each other for other deals through the platform. Each company is rated on its own merits.
"Pipe is leveling the playing field for companies in the capital markets. By taking the underlying contracts that generate recurring revenue streams and making them tradable for the first time, Pipe has unlocked a multi-trillion dollar asset class, revenue," billionaire Social Capital CEO Chamath Palihapitiya said in a statement.
When Pipe launched, its initial go-to-market strategy focused on SaaS (software-as-a-service) companies which were "obvious low-hanging fruit for recurring revenue." Since then, the company has expanded into many other verticals, from bootstrapped businesses with $100,000 in ARR to large public and private companies with millions in ARR.
To be sure, Pipe doesn't view its offering as an absolute alternative to equity financing, which Hurst believes is an important tool, especially for early-stage companies that are pre-product market fit or pre-revenue as it's a highly-speculative stage of company building.
"Once you've reached those markers and you have this rinse-and-repeatable growth engine, we think the best way to financial growth is actually trading the recurring revenue streams that you're generating yourself for upfront capital. So, it's as if all of your customers have pre-paid you upfront the full annual amount, but you're still able to offer flexible payment terms, whether it be monthly or quarterly, to your customers," Hurst said.
Hurst, a seasoned entrepreneur, has witnessed the challenges of traditional equity financing beyond the earliest stages of a company. He's also seen his equity diluted in the past.
"We know what it's like to sell a significant portion of your company. At the time, we didn't necessarily know it was unnecessarily because there were limited other options," Hurst said.
With Pipe's early success, Hurst sees a global opportunity with the proceeds from the strategic financing round going mainly toward expansion. Europe is already showing indications that it will be a "very important market" for Pipe.
"Our TAM [total addressable market], the way we think about it is, every private and publicly-traded company in the world that has a high degree of predictability in their revenues," Hurst said.
Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.
