Pipe Secures $250 Million Funding, Valuation Reaches $2 Billion

Initial reports from TechCrunch in late March indicated that Pipe, a startup aiming to create a marketplace for revenue, had raised $150 million. However, the deal has now finalized, and Pipe confirms a larger sum.

Funding Details and Oversubscription

Miami-based Pipe ultimately secured $250 million in funding, achieving a $2 billion valuation. Co-founder and co-CEO Harry Hurst stated the round was “massively oversubscribed.”

Originally, the company had allocated $150 million for this funding round, but ultimately increased the cap to $250 million due to substantial investor interest. They could have potentially raised even more capital.

Investor Participation

Baltimore, Maryland-based Greenspring Associates spearheaded the investment. Additional participation came from new investors including Morgan Stanley’s Counterpoint Global, CreditEase FinTech Investment Fund, Fin VC, 3L, and Japan’s SBI Investment.

Existing investors also contributed, such as Next47, Marc Benioff, Alexis Ohanian’s Seven Seven Six, MaC Ventures, and Republic.

Recent Funding and Total Capital Raised

This investment follows a $50 million “strategic equity funding” round raised approximately 2 ½ months prior. This earlier round included investors like Siemens’ Next47 and Jim Pallotta’s Raptor Group, as well as Shopify, Slack, HubSpot, Okta, and Social Capital’s Chamath Palihapitiya.

With this latest round, Pipe’s total capital raised now amounts to around $316 million. The new funding represents a significant increase in valuation compared to previous raises.

Rapid Growth and Historical Context

Having initially covered Pipe’s $6 million seed funding in February 2020, the company’s trajectory has been remarkable. Pipe asserts it is the fastest fintech to achieve a $2 billion valuation in under a year since its public launch in June of last year.

While independent verification of this claim is pending, the company’s growth has undeniably been both rapid and impressive.

Pipe’s Core Mission and Founding

Founded in September 2019 by Hurst, Josh Mangel, and Zain Allarakhia, Pipe was created to provide SaaS companies with upfront access to their revenue. This is achieved by connecting them with investors who purchase contracts at a discounted annual rate.

Pipe’s buy-side participants are described as a carefully selected group of financial institutions and banks.

Alternative to Traditional Financing

The platform aims to offer companies with recurring revenue streams access to capital without diluting ownership through equity financing or being compelled to take out conventional loans.

Platform Adoption and Trading Volume

Since its public launch in June 2020, over 4,000 companies have joined the Pipe trading platform. More than 1,000 of these sign-ups occurred after the March funding announcement, according to Hurst.

The total tradable annual recurring revenue (ARR) on the platform exceeds $1 billion and is projected to reach $2 billion. Currently, tens of millions of dollars are traded on the platform each month. In March, the company reported tens of millions of dollars traded during the first quarter.

Expansion and Future Plans

“Growth has been insane,” Hurst conveyed to TechCrunch. “This validates our high valuation and the strong investor interest.”

Pipe’s platform has expanded to offer non-dilutive capital to businesses beyond the SaaS sector. Currently, 25% of its customers are non-SaaS, a figure expected to surpass 50% by the end of the year.

Diversifying Customer Base

Businesses utilizing Pipe’s platform now include property management companies, direct-to-consumer subscription businesses, insurance brokerages, online pharmacies, and organizations in the sports and entertainment industries. Even venture capital firms are leveraging the platform.

“Any business with predictable revenue streams is well-suited for trading on our platform,” Hurst emphasized. “We’ve unlocked the largest untapped asset class globally.”

Differentiating from Debt-Based Solutions

Hurst clarified that Pipe’s offering is distinct from traditional debt or loans.

“Other companies in this space deal in loans, essentially reselling debt,” Hurst explained. “This is a key differentiator for us.”

Team Growth and Global Expansion

Currently operating with a team of 34, Pipe intends to double its headcount by year’s end, utilizing the newly acquired capital.

“We haven’t spent any of our previous funding,” Hurst revealed. “However, we’re experiencing significant demand globally and across various sectors. This capital will secure our future and enable us to invest in growth across these verticals and initiate global expansion.”

Investor Perspective

Ashton Newhall, managing general partner of Greenspring Associates, described Pipe as “one of the fastest-growing companies” his firm has encountered.

He added that the startup is “addressing a very large total addressable market (TAM) with the potential to fundamentally reshape the financial services landscape.”

Focus on Alternative Financing

Greenspring was particularly attracted to Pipe’s alternative financing approach.

“While many companies serve specific niches with traditional lending products, Pipe isn’t a lender,” Newhall explained to TechCrunch. “It’s a trading platform that connects customers directly with institutional investors, providing the best possible pricing for trading contracts instead of taking out a loan.”