Revenue Based Finance

The birth of Ritmo, the Revenue Based Finance platform

Ritmo sets out to respond to a growing need among startups when it comes to getting funding.

Pablo Gasalla By Pablo Gasalla

Why Ritmo was born

Ritmo was created in response to a growing need among digital startups for funding, especially growth companies with predictable revenues. Companies with technology revenues generally need capital to grow. To do so, they can basically turn to two financing channels: financing through traditional banking or through venture capital funds. And both have significant handicaps.

Bank financing

The main problem for a digital company when it comes to obtaining bank financing lies in the very model of these companies. Some 60% of these companies have not yet reached a sufficient level of assets or a turnover history to be able to access bank financing. This is why they find that banks ask them for guarantees, collateral and a large amount of paperwork that make it difficult for them to access the capital they need. In addition, these companies have to deal with contracts that have small print, hidden fees and fixed terms which mean that the conditions for accessing capital are not the most suitable for a start-up.

Risk capital financing

In the case of seeking financing from Venture Capital or other types of investors (Business Angels, Family offices, Seed Capital) the reality is that in most cases the companies do not meet the necessary scalability requirements. There are many companies that have a very positive evolution of turnover, with annual increases in revenue between 20% and 30%, which are still of no interest for private equity, who are looking for returns of up to 10X on their investments to be able to return 3X to their investors as a target return. And even if approved, these agreements can have undesirable consequences for the entrepreneur, as they imply loss of control of the business and dilution of their own equity. If we also take into account that a large part of the capital raised in the growth phases, approximately 48%, is dedicated to financing digital marketing campaigns, it is even less efficient to use financing methods that dilute your ownership just to invest in advertising on Google and Facebook. It is in this context that Ritmo, a new Revenue Based Finance platform, was created to respond to the growth of digital companies, offering a complementary means of financing to grow your business.

Revenue Based Finance: an innovative channel for financing

Revenue Based Finance is an alternative form of financing for companies that has been around for many years in sectors such as Energy and Infrastructure, and has become popular in the last 10 years for digital companies with recurring revenues, especially in North America and the UK. It is a new way of financing digital growth companies. Namely, in this phase we will fund your digital marketing campaigns in exchange for a small percentage of your future revenue. In return, the revenue based finance company charges a fee which is 6% of the amount borrowed. The philosophy is simple: to give businesses access to fair, flexible, transparent and fast funding for their digital marketing campaigns, allowing them to repay that funding through a small percentage of their future revenue. In return? A total commission of 6% on the amount granted. No small print, with absolute transparency.

How much financing does Ritmo provide?

The amount that Ritmo can finance is between €10,000 and €1 Million. This amount will depend mainly on the company’s turnover and its investment in digital marketing.

Technology and data as pillars of Ritmo

The basis for achieving this lies in Ritmo’s technology platform, which is able to predict the future revenues of digital companies, based on an artificial intelligence system and a predictive data model, which makes it possible to analyse hundreds of variables that influence the level of sales of these companies, and to predict future revenues very accurately.

Who is Ritmo geared towards?

Ritmo is particularly suitable for digital businesses with consistent and predictable revenues: Ecommerce, D2C, SaaS, marketplaces, App Games and new digital subscription models, with the following requirements:

  • Company registered in Spain
  • Average monthly revenue of at least €10K, over the last 6 months
  • At least 12 months of revenue history with consistent business metrics
  • At least 6 months of proven investment in the main performance marketing platforms (Google & Facebook Ads)
  • Charges made through an online payment gateway

For entrepreneurs, by entrepreneurs

Ritmo aims to help accelerate Europe’s digital transformation. It is an ambitious project that wants to make its mark so that Europe’s high-growth startups and digital small and medium-sized enterprises can overcome challenges and meet their goals, focusing on delivering value without being distracted by the problems of raising financing. Digital companies with predictable revenues should have access to fast, flexible and fair funding whereby they pay back capital comfortably and in line with the pace of evolution of their business. Ritmo is part of the same entrepreneurial ecosystem. The founding team’s vision is to contribute to the development of entrepreneurial capital in Southern Europe by fostering the growth of the European digital enterprise, with a focus on sustainability and diversity. Three serial digital entrepreneurs make up the company. Experts in digital marketing, Fintech and AI who bring their skills to the fore to help improve the European digital entrepreneurship ecosystem, starting out with their first step in Spain. The company has grown out of the need to transform the capital and financing industry, to make it more accessible and transparent for entrepreneurs, using technology to do so and basing its operations on the performance data of the relevant businesses. Digital startups, for their part, know their business model inside-out; they know the digital marketing levers that drive it and the direct impact they have on attracting new customers. They now have an alternative way of financing their digital marketing actions through a technological platform in a more flexible, agile and fair way. With Ritmo, the entrepreneur is not diluted, nor do they require personal guarantees, collateral or seats on the Board of Directors. There is no partner pact, because they are not partners, they are providers of an innovative service that offers the financial resources startups need through a simple and clear contract, with no small print and no hidden commissions; as transparent as their own product. The result? Fast financing that helps you grow the business together, thereby achieving recurring access to the necessary financial resources to make more potential customers aware of your clients' products or services and make the company grow in a sustainable and efficient way.

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