The industry Pipe is in is Fintech. The more nuanced take would also describe them as a lender.
The interesting thing about them being in Fintech is Fintech is super hot right now. There were a bunch of notable exits this year. Honey was acquired by Paypal for $5B in January and below are a few others that happened in February
In terms of its relationship with lending one key point is the fact that they are lending money on the back of software contracts.
I love this because as Robert Smith, you know the guy that paid off the student loans of the ENTIRE 2019 graduating class of Morehouse College, once said that "Software contracts are better than first-lien debt,". Smith says "a company will not pay the interest payment on their first-lien until after they pay their software maintenance or subscription fee.” Essentially what Smith is saying here is that software contracts are amazing assets to lend against and that is exactly what Pipe is doing!
Another point to acknowledge is the reason this is novel is because it has been very hard for startup companies to get loans from traditional banks. They don't have the historical precedence or assets to warrant it. This is why Venture Capital is the way most startups are funded.
But startups are beginning to realize that equity funding (aka taking money from VC’s) isn’t always the best option.
When WeWork tried to go public it was revealed that the company was propped up by venture capital investors. This made more founders and VC’s start to rethink the growth over everything model and realize that profit is an important part of building a business.
Enter venture debt. - “A form of debt financing for venture equity-backed companies that lack the assets or cash flow for traditional debt financing, or that want greater flexibility.”
This form of funding companies is growing rapidly as shown above but it does have its downside. One, in particular, is that it gives “the creditor of the loan the option to purchase equity from the indebted startup.” This almost defeats the whole purpose of not selling your equity to VC for money.
This is where Pipe changes the game. They offer to finance the reoccurring revenue produced by the software companies they work with.
Like Robert Smith said, “a company will not pay the interest payment on their first lien until after they pay their software maintenance or subscription fee”.
Pipe is offering an improvement to the current model of financing for software companies by speeding up the process.
Today, companies go to specialized banks and VC’s for debt financing. This process takes at least a day and in most cases a few days. With Pipe, companies can have additional financing in as little as a few hours.
Lastly, this is already working.
Fastpay does this for media companies. As of 2017, they had originated over $2B in financing for companies. Software is an even larger market so I imagine Pipe can be a lot larger than that.
The founders are experienced and have already had one successful exit.
Harry Hurst and Josh Mangel are the Co-CEOs of Pipe. They were also both Co-CEOs of Skurt. At Skurt, Harry and Josh raised $11.3M and sold the company to Fair.com after operating the business for four years.
I typically wouldn't like to see two CEOs but it seems to work for Harry and Josh.
This company is too new to have any public financial data. I bet their revenue is low but as stated above, the opportunity is HUGE.
Below is the contact information for the people I would reach out to:
LinkedIn - Harry Hurst, Co-Founder and Co-CEO
Twitter - @harryhurst (previously @_harryhurst)
Email - email@example.com
LinkedIn - Josh Mangel, Co-Founder and Co-CEO
Twitter - @joshmangel
Email - firstname.lastname@example.org
LinkedIn - Ryan Sells, VP of Revenue
Email - email@example.com