Ratio bags $411M in equity, credit for flexible subscription payment models

Fintech startup Ratio secured $411 million in equity and debt funding to continue developing what it calls “a new flavor” of buy now, pay later that combines payments, predictive pricing, financing and a quote-to-cash process.

Co-founder and CEO Ashish Srimal founded Ratio in 2021 with CTO Mason Blake, and they have been heads down ever since working on the company’s concept, which is to help SaaS and technology companies tap into the $1.5 trillion subscription market for recurring revenue.

Srimal was previously founder and CEO of sales mobile assistant startup SmarterMe, while Blake was formerly CEO of B2B legal marketplace UpCounsel, a company that exited to LinkedIn.

Their new funding includes $11 million in venture dollars raised in late 2021 and a $400 million credit facility for customer financing. Investors in the round include Streamlined Ventures, Cervin Ventures, 8-Bit Capital, HoneyStone Ventures and a group of individual investors.

When deploying subscription-based business models, SaaS companies often face challenges, like deferred cash flows, discounts and time to recoup customer acquisition costs. For example, Srimal explained that if a company signs a contract for $1.2 million, but the customer wants payments to be monthly or adjusted to how best they can pay, some companies can’t do that, so they offer a 20% or 30% discount.

That’s where the credit facility comes in: Ratio makes the discounts unnecessary by giving the SaaS company the $1.2 million upfront so they can offer more flexible payment options for their customers to match their cash flow needs.

“If you have better cash flow in December versus the summer months, you should be able to choose then as the time to pay for the software,” Srimal told TechCrunch. “For SaaS sellers, they get cost-free capital upfront and can then pass on some of the financing fees to their customers.”

Through this approach, Srimal believes SaaS companies can sell more and faster as they deploy more repeatable offerings. Ratio’s machine learning technology also provides financial and behavioral data to inform vendors on if they are pricing their subscription tiers correctly and the likelihood of churn, lifetime value and willingness to pay.

Srimal says the upfront capital approach has caught on and it has “over half a billion dollars of business in the pipeline already.” It has already funded over $5 million to date, and he expects that to increase to $30 million by the end of the year.

In addition to the heavily booked pipeline, the company grew 10x in annual recurring revenue between the first and second quarters of 2022 after officially launching earlier this year.

Meanwhile, the equity portion of the investment is going into product development of the financial instrument, growing the team of 10 and into operations, Srimal said.

“The product road map is strong, and in the future, Ratio will grow into different facets and will continue to conquer the challenge of enterprise software billing,” Mason told TechCrunch.