New York, Frankfurt Berlin’s start-up financing platform Recap, founded in 2021, has the potential to significantly expand its operations. This is made possible by a $ 100 million (approximately € 95 million) credit line provided by Silicon Valley Bank (SVB). “The Silicon Valley Bank investment helps us grow,” says Recap co-founder Paul Becker.
And it also helps SVB to get to know the German market better: “The German start-up market works differently than in the US or Great Britain. We know how founders work in Germany, ”explains Becker, who founded Recap with Jonas Tebbe.
Recap does not finance startups by way of capital injections, but by making loans. “Young companies need money, but they don’t always want more capital. Many banks refuse to provide funding. This is where we come in, ”says Becker.
According to its own statements, Recap has so far spent a double-digit sum of millions on over 200 companies. They show an annual turnover of between 300,000 and 30 million euros. When it comes to loans, the approach is restrictive, with crypto companies not getting any money, for example, Becker says. Rather, the focus was on a specific field.
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“The main target group was initially software-as-a-service companies, but now also e-commerce start-ups. The decisive factor is that their business model is subscription based, ”explains Becker. Software companies often do not have the classic security features and therefore do not receive a bank loan. If they rely on subscriptions, they have the advantage: customers have contractually agreed to pay a regular fee.
A young start-up with an experienced team
That’s an advantage, says Becker: “We can see exactly how large the customer base is paying subscription fees. This gives us a high level of planning security because, so to speak, we borrow money for future income streams. ” The credit limit is 60 percent of annual sales.
Pipe financing platform shows that investors are very interested in the business model. Founded in 2019 and headquartered in Miami, the startup raised over $ 300 million in total. In the last round of financing last May, Pipe said it is valued at over two billion dollars.
A competitor in Europe is Vitt, which was founded in January last year and is based in London. The platform, which specializes in software-as-a-service companies, claims to be active in both the UK and European markets.
Recap is also a young start-up, but with a relatively experienced team. Co-founder Paul Becker has built Liqid digital asset manager, in which he invested, among others Liechtenstein’s private bank LGT in 2021. Becker is still committed, but has relinquished smooth operations. The focus is on summing up.
Recap currently employs 30 people and intends to expand significantly this year. The total loan volume that the platform may suffice is “over € 100 million,” says Becker. Means: By far the biggest lender is SVB. According to Becker, close cooperation was a deliberate decision, but we also talk to other interested financiers.
Venture debt financing is still a niche in Germany
SVB is well versed in the Recap business model. The bank was founded in California in 1983 and specializes in venture debt, i.e. lending to start-ups and development companies. It has been represented in Germany since 2018 and is one of the few local banks to lend outside capital to young, mostly loss-making companies. Deutsche Handelsbank, also involved in this area, has been in rough waters for years.
At the beginning of Germany, SVB has thrown a big party, recently things have become calmer around the bank. According to the insiders, building German business was more difficult than expected. According to data from the European Investment Bank, venture debt accounts for about 15 percent of the US venture capital market, compared to only five percent in Germany.
“We are constantly looking for interesting and innovative start-ups that we finance locally and with whom we cooperate globally. We really like the Recap band. He has shown in the past that he can build and scale a business, ”explains Andrew Parker of SVB in Germany.
Recap’s Lending Principles were also similar to SVB’s. “In this respect, the Berliners are a good partner and contribute to the development of the innovation ecosystem in Germany,” says Parker.
The SVB team in Frankfurt and London are behind a $ 100 million pot. Recap does not receive the entire amount paid directly, but step by step, depending on the customer’s needs, in the form of installment loans. In the background is a Luxembourg securitization company. SVB outsources some of its work to Recap and can grow faster.
Recap founders are not worried about the current downturn in tech markets, at least in the outside world. The platform will be launched in the Netherlands in June this year. Silicon Valley money should accelerate expansion.
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