Pipe raises $50 million to unlock revenue as an asset class

Investor line-up includes Next47, Raptor Group, Shopify, Slack, HubSpot, Chamath Palihapitiya, Marc Benioff, Alexis Ohanian and Joe Lonsdale

Pipe, a company that has built a trading platform for recurring revenues, has raised $50 million in a strategic equity funding round. The funding will be used to expand the company’s global presence and build on its partnerships.

The round was led by investors Siemens Next47 and Jim Pallotta’s Raptor Group. The funding round also had some notable participants including Shopify, Slack, HubSpot, Okta, Chamath Palihapitiya, Marc Benioff, Michael Dell’s MSD Capital, Republic, Alexis Ohanian and Joe Lonsdale. This round brings its total equity raised to $66 million.

A minority part of the round is allocated to Pipe’s secondary program, which allows its employees to sell some of their equity through company-managed secondary sales on the AngelList platform, Axios explains that program here.

Interview with Harry Hurst, Pipe co-CEO

Pipe’s trading platform provides companies of all sizes access to the capital markets, and works with companies that want to access their booked revenue up front by turning their quarterly or monthly recurring revenue into annual recurring revenue cash flow.

“[Companies] are trading those recurring revenue streams with institutional investors,” Harry Hurst, co-founder and co-CEO told Finledger. “They’re able to get paid out instantly, as if their customers have pre-paid them upfront for the full year of service, whether that be software, a services business, your streaming subscription, telecommunications, your cell phone bill, internet service. Anything that’s on a predictable payment cadence can be traded on the platform.”

Hurst wouldn’t disclose what the company’s valuation was at this funding round. But he did further explain that people often pit Pipe against equity, but Pipe doesn’t view itself as an absolute alternative to equity. Instead, Hurst said his company plays “nicely and complimentary to equity financing.”

Hurst goes on to explain that by directly connecting companies with the capital markets Pipe is able to cut out all the middlemen to allow them to trade, which he believes is “the purest form of trade.”

“We call it the smallest atomic unit of value within a company which is the actual contract itself. That is the promise of future payments from customers,” he said. “It’s the closest proxy to revenue. That’s why we call it revenue as an asset class.”

Pipe already is servicing customers internationally and this funding will only further fuel its global expansion. Officially, the business is headquartered in Miami, but it doesn’t have a large headquarters considering there are only three people on the Pipe team based in Miami, including Hurst himself. Pipe officially launched in June 2020. But, Pipe had a beta launch in February 2020 as a trading platform focused on SaaS businesses.

Currently, Pipe has about 22 employees but isn’t looking to aggressively hire. Going forward, Hurst said there’s a lot of potential for Pipe to grow.

“Virtually every company in the world either has a recurring revenue model already, or if they don’t, they’re at least thinking about shifting to it, and how they can add that to their armory,” Hurst said.

What notable investors are saying (according to the news release):

“Pipe is levelling the playing field for companies in the capital markets,” said Chamath Palihapitiya, Founder & CEO, Social Capital. “By taking the underlying contracts that generate recurring revenue streams and making them tradable for the first time, Pipe has unlocked a multi-trillion dollar asset class, revenue.”

“We are thrilled to participate in Pipe’s most recent round and look forward to working with them as they bring this important capital source to entrepreneurs around the world. Pipe provides non-dilutive, founder-friendly financing, which is critical to creating more successful entrepreneurs in the future, and both Pipe and Shopify are deeply aligned toward that mission,” said Brandon Chu, VP Product, Shopify.

“HubSpot and Pipe share a mission to help companies sustainably scale, and broad access to capital is critical for growth,” said Andrew Lindsay, Senior Vice President of Corporate Development and Business Development, HubSpot. “Pipe will be transformational for our many customers who were previously limited to equity or debt financing.”

“Pipe is revolutionizing how companies access capital by empowering them to trade their most valuable asset: their underlying contracts,” said Matthew Cowan, General Partner at Next47. “As an active investor in the recurring revenue space, we are incredibly impressed with how the Pipe platform changes the game for growing businesses by giving them dynamic access to lower cost of capital.”

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