December 29, 2021

How BridgeUp is different from equity financing

Zeus Dhanbhura
CEO at BridgeUp

BridgeUp vs Equity Financing

BridgeUp is an innovative platform that allows businesses to get paid upfront by trading their contracts for upfront capital.

For example: If you run a SaaS startup and have an annual contract (paid monthly) worth $50K, you could list that as an asset on the platform and invite bids from the investors. Within a few hours, you’d have interested investors who would bid on that asset for a slightly lower price than the contract value.

Let’s say the investor pays $46K as the highest bid. The investor then receives a full $50K vs. their $46K investment. That means the investor gets a $4K profit.

Now, there are many key benefits to BridgeUp’s fundraising model:

  • BridgeUp allows businesses to maintain control of their company and avoid giving away any ownership stake.
  • Businesses can continue to grow and scale with BridgeUp, meaning they can raise more money down the road selling more of their recurring revenue assets.
  • The cost of capital can be significantly lower for companies using BridgeUp versus raising money through traditional investment rounds or debt.
  • Businesses retain control over their existing cash flows and are able to use them in other meaningful ways they like.

When a business needs quick investments to grow without equity dilution, BridgeUp is an attractive option.

In comparison, equity financing is a process of raising money from investors in exchange for an ownership stake in the company.

For many decades, equity financing has been the preferred choice for entrepreneurs looking to raise capital. But, the process of equity financing has its own risks and rewards, especially if the company is overvalued by investors (or undervalued).

Usually, this type of financing involves rounds that are done in multiple stages or tranches, with one round followed by another shortly after. This process could take a few weeks to sometimes, months depending on the amount of capital and due diligence involved.

When Choosing Equity Financing Makes Sense

If the company wants large investments, and lacks enough cash flow to fund its growth (such as hiring new employees, expanding marketing efforts, etc.), then equity financing is a better option.

It would also make more sense if the company needs a strategic partner who would invest his/her time, business acumen, and resources along with the capital.

BridgeUp vs Equity Financing: Key Differences

If you are an entrepreneur thinking about raising capital for your company, then the next logical question would be to decide whether BridgeUp or equity financing is better. Here are the key differences between both:

  • Most companies today use private investors (angels and VCs) before seeking finance through equity financing. BridgeUp allows companies to collect capital, without giving away any ownership stakes in the company.
  • BridgeUp is well suited for companies with recurring revenue business models such as SaaS and Services who have a viable product with referenceable clients on a recurring payment model.
  • Capital raised through equity financing can be used to fuel marketing efforts or late-stage funding rounds where companies require much higher capital to scale their businesses.
  • BridgeUp allows you to treat your recurring revenues as an asset class, which has a unique set of attributes to back it. There is a ready market that can analyze these assets and invest in them if they see value in it almost immediately. The investors here make decisions based on the recurring revenue and pay you upfront, which companies return without disturbing their monthly contracts.