Up until now, startups have had two options: scale fast while accepting significant debt or dilution, or bootstrap while accepting less available cash flow and slower growth.
The former option, taking on external finance, can be expensive and time consuming for a business but tends to be pursued by founders because of the opportunity to scale quickly once the capital is in hand.
But what if there was a way to access this capital without having to dilute your cap table or take on significant debt?
Fortunately, there is a third option on Mantle.
A New Kind of Startup Loan
We have designed Mantle to provide a new type of startup loan that does not come with dilution or a personal guarantee.
The business finance available on Mantle does not require startups to give away control of their business nor owe banks considerable amounts of money, which falls to the founders to repay if defaulted on.
At Mantle, we have created a way for businesses to sell a new asset, future revenue, to investors who purchase this asset for upfront capital, i.e. a company can sell $500,000’s worth of their future income, paid back over 40 months, for cents on the dollar today.
This type of startup loan is different to what is currently available on the market for several reasons:
- It does not involve expensive interest rates. Businesses are not paying back more than they borrowed; instead, they are accessing their future revenue at a slight discount and then repaying investors monthly.
- Repayments are made as a portion of monthly income. Unlike traditional loans, which are paid at a specific rate, regardless of business performance, repayments are made as a portion of monthly revenue on Mantle. So if your income rises, you pay more, and if it falls, you pay slightly less.
- Lending decisions are data-driven. On Mantle, businesses connect their payment or banking software to verify their income levels; this allows investors to make data-driven decisions based on numbers.
- The cost of capital is lower. Because investors competitively bid on revenue assets under auction, the price of capital is reduced for businesses.
How Does it Work?
The process of raising capital on Mantle is as follows:
1. Account creation
Businesses sign up to Mantle and connect their payment or banking software, e.g. Stripe, to help verify their revenue streams.
2. Capital request
Once verified on Mantle, companies can submit a capital request — this effectively determines how much of their future revenue they want to access immediately. During this process, they will set the term length and what percentage of their monthly recurring revenue (MRR) repayments will amount to.
3. Bidding
Once a request has been submitted, investors bid on the revenue-backed assets, e.g. $0.941 for every $1 of future revenue. The winning bids being the highest when the auction closes.
4. Acceptance
Once the initial bidding closes, the winning bid(s) is presented to the business.
5. Transfer
Upon acceptance, capital is transferred to the business’ Mantle account to hold (and benefit from the interest) or withdraw and inject it into their company for scaling.
6. Trading
After the auction has been concluded and the capital transferred, investors can trade revenue-backed assets on the exchange, speculating on the speed of return and various other variables impacting the price of a given asset. This secondary market expands the liquidity available for companies raising capital through Mantle.
Case Study
At this point, it’s instructive to see how this all works in practice.
An eCommerce store currently generating $1 million a month in revenue wants to scale sales and marketing and therefore needs some capital to allocate amongst these teams. The eCommerce company submits a $2 million request for capital on Mantle, to be repaid at 5% of monthly revenue ($50,000).
The forecast number of repayments is 40; however, given their MoM growth rate of 10%, this will likely be repaid earlier.
Once the request is submitted, the auction takes place for 24 hours, and when it concludes, the business receives a leading offer of $0.943 for the full $2 million.
As soon as the business accepts the bid, they receive $1,886,000 into their Mantle account. Some of this is withdrawn right away to expand their sales and marketing teams, and some of it is left in their Mantle account to benefit from the 10% interest rate and facilitate the repayments when they begin.
On the other side of the platform, investors in the company’s revenue begin trading and establish a market-clearing rate at $0.95 for this particular revenue asset — the holders of the asset receiving the repayments every month.
New Business Finance Option
Through Mantle, businesses can access funds in a far more streamlined, efficient, and convenient way than before. Our goal with Mantle is to increase access to capital across a broad range of industries to enable more businesses to reach their full potential.
About Mantle
Mantle is a finance platform that allows businesses to convert monthly recurring revenue into instant upfront capital for marketing, inventory, or hiring.
For more information, please visit mantle.fund or email hello@mantle.fund.
