The rise of revenue-based financing
RBF used to be a fringe option. For SaaS teams crossing $1M ARR in 2025, it's now often the cheapest dollar on the table.
January 11, 2025 · Priya Shah
When Northbay Studio crossed $1.2M ARR last spring, their founders faced a familiar inflection: take a bridge round at a flat pre-seed valuation, or look at debt. They picked door number three, revenue-based financing.
Why it worked for them
Northbay’s gross margin sits above 82%. Their churn is under 2% a month. Their pipeline compounds on itself because most of their revenue comes from referrals. RBF providers underwrite on exactly those three numbers.
The mechanic
- Capital arrives in two tranches, sized against trailing revenue.
- Repayment is a flat percentage of monthly revenue until a cap is reached.
- No warrants. No covenants. No board observer rights.
What we learned
RBF favours steady, margin-healthy businesses. If yours qualifies, we’d strongly suggest pricing it alongside your next equity round before you sign anything. The spread is often larger than founders expect.