The global revenue-based financing market size was valued at $901.41 million in 2019 and is projected to reach $42,349.44 million by 2027, growing at a CAGR of 61.8% from 2020 to 2027.
Revenue-based financing, also known as royalty-based financing, is a way of raising business capital from creditors, who earn a portion of a company's ongoing gross profits in return for money they have invested. A company that raises funds via revenue-based financing needs to make periodic payments to pay off investor's principal. In case of revenue-based financing activities, creditors earn a standard share of business profits until a predefined sum is compensated back.
Revenue-based financing is emerging as a route for start-ups to expand sustainably and has driven small business owners to pursue alternative financing, which has become a major factor for the revenue-based financing market growth. In addition, growth in need for faster & quicker funds among startups and revenue-based investing (RBI) becoming one of the most prominent & popular business models for investors are some of the major factors that propel the market growth. However, lack of understanding & awareness towards revenue-based financing and absence of standardization are some of the factors that limit the market growth. Conversely, startups & small businesses are adopting & implementing technologies in their businesses, which is expected to provide lucrative opportunities for revenue-based financing market revenue during the forecast period.
The small-sized enterprises segment dominated the revenue-based financing industry in 2019, and is projected to maintain its dominance during the forecast period. This is attributed to the fact that enterprises under this category are looking for alternative financing opportunities, which do not involve raising equity. Therefore, revenue-based financing provides better solutions for accelerating business & sustaining with new business model in the market.
The report focuses on growth prospects, restraints, and revenue-based financing market trends analysis. The study provides Porter’s five forces analysis to understand the impact of various factors such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers on the revenue-based financing market.
Segment Review
The revenue-based financing market is segmented on the basis of enterprise size, industry vertical, and region. In terms of enterprise size, it is segmented into micro enterprises, small-sized enterprises, and medium-sized enterprises. On the basis of industry vertical, it is segmented into IT & telecom, healthcare, media & entertainment, BFSI, consumer goods, energy & utilities, and others. Region wise, the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA.
The report analyses the profiles of key players operating in the revenue-based financing market include Capria Ventures LLC, Decathlon Capital Partners, Fleximize, GetVantage, Ken Capital Technologies Pte Ltd, Lighter Capital, SABINE CAPITAL PARTNERS, LLC, SaaS Capital, Uncapped Ltd., and UPLIFT1. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.
By Enterprise Size
Small-sized Enterprises accounted for the largest market share in 2019.
COVID-19 Impact Analysis
COVID-19 pandemic has a significant impact on the revenue-based financing market size and is projected to witness a momentous growth in the upcoming years. This is attributed to improvement in the global economy, surge in venture debt funding, and increasing developments in the revenue-based financing platforms to overcome the negative impact on the industry. This, in turn, has become some of the major factors expected to accelerate the revenue-based financing market growth during the global health crisis.
Market Landscape and Trends
The revenue-based financing market has witnessed significant growth and evolution in recent years, reflecting a shift in financing models for startups and small businesses. One of the prominent trends in the revenue-based financing market is the increase in the number of specialized firms and platforms that cater specifically to this funding model. These companies have recognized the demand for flexible financing options and have emerged as intermediaries between investors and entrepreneurs. They streamline the application process, conduct due diligence, and facilitate the negotiation and structuring of revenue-based financing deals, making it easier for businesses to access this type of funding.
Furthermore, another noteworthy trend is the expanding investor interest in revenue-based financing. Traditionally, venture capital and private equity firms dominated the startup funding landscape. However, revenue-based financing gains traction as an attractive alternative for both, entrepreneurs and investors. This shift is driven by several factors, including the potential for higher returns than traditional debt financing, reduced dilution for founders, and a more predictable repayment structure based on future revenue streams.
Moreover, the revenue-based financing market witnesses increase in integration with technology and data-driven underwriting processes. Fintech companies leverage advanced analytics and algorithms to assess borrower creditworthiness and predict future revenue performance more accurately. This integration of technology streamlines the due diligence process, reduces transaction costs, and improves the overall efficiency of revenue-based financing. Therefore, these are some of the major market trends of revenue-based financing market.
Government Initiatives
Several countries globally have implemented government initiatives to promote and support revenue-based financing as an alternative funding option for startups and small businesses. These initiatives aim to address the challenges faced by entrepreneurs in accessing traditional forms of financing, such as bank loans or venture capital. For instance, in the U.S., the government has introduced programs such as the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, which provide revenue-based financing to innovative companies through grants and contracts. Similarly, in the UK, the government launched the future fund scheme on May 20, 2020, which offers convertible loans to startups based on their revenue. Furthermore, countries such as Australia, Germany, and France have also implemented various revenue-based financing initiatives to foster entrepreneurial growth and support the development of innovative ventures. These government initiatives demonstrate the increasing recognition of revenue-based financing as a viable funding option and highlight the commitment to nurturing the startup ecosystem and driving the economic growth.
Top impacting factors
Surge in demand among investors to earn more profits
Revenue-based financing, which is a type of capital-raising method where investors in exchange for providing capital; receive a certain percentage of a company’s ongoing total gross revenues. In addition, investments in start-ups & growing firms provide investors with huge benefits, in terms of higher return on investments. Moreover, revenue-based investing (RBI) has become one of the most prominent & popular business models for investors, hence, accelerates the market growth. Therefore, increase in benefits & higher returns from investing in start-ups & new businesses is increasing the demand for earning more profits among investors, which as a result drives the revenue-based financing market growth.
By Industry Vertical
IT & Telecom is projected as one of the most lucrative segments.
Lack of awareness & understanding toward revenue-based financing
Misconceptions & low education among start-ups & small business community creates barriers in the adoption of revenue-based business loans. In addition, awareness toward several options to access capital, repayment models, and transparency, in terms of fees for revenue-based financing are the major factors that hamper the market growth. Moreover, lack of understanding toward identity verification and presenting business documentation during integrations of revenue-based loans among start-ups & small businesses, thereby, restrict growth of the revenue-based financing market.
Rise in adoption of digital platforms
Revenue-based financing solution providers have numerous opportunities to expand existing product lines and offer value added services to their customers. As start-ups & small business are adopting & implementing technologies in their business model, therefore, companies providing revenue-based financing solutions can develop their offerings by providing digitalized financing solutions in the market. For instance, Uncapped Ltd., a UK-based digital financing company, provides revenue-based loans through its digital platforms. With the help of this platform, start-ups can register themselves in 15 minutes and receive funds to increase more inventories and attract potential customers through online advertisements. Therefore, adoption of advance technologies by various players is becoming revenue-based financing market opportunity in the upcoming years.
By Region
Asia-Pacific would exhibit the highest CAGR of 65.0% during 2020-2027.
Key benefits for stakeholders
- The study provides in-depth analysis of the global revenue-based financing market share along with current & future trends to illustrate the imminent investment pockets.
- Information about key drivers, restrains, and opportunities and their impact analysis on the market size are provided in the report.
- Porter’s five forces analysis illustrates the potency of buyers and suppliers operating in the industry.
- An extensive analysis of the key segments of the industry helps to understand the global revenue-based financing market trends.
- The quantitative analysis of the global revenue-based financing market outlook from 2020 to 2027 is provided to determine the market potential.
Revenue-Based Financing Market Report Highlights
| Aspects | Details |
 By ENTERPRISE SIZE |
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 By INDUSTRY VERTICAL |
|
 By Region |
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 Key Market Players | UPLIFT1, SABINE CAPITAL PARTNERS, LLC, Decathlon Capital Partners, Lighter Capital, Capria Ventures LLC, Ken Capital Technologies Pte Ltd, GetVantage, Fleximize, SaaS Capital, Uncapped Ltd. |
Analyst Review
Startups & small businesses are adopting digitalized platforms & keeping up with new technology. This, as a result has become a major trend in the global revenue-based financing market. Due to COVID-19 outbreak, government mandated lockdowns & business shutdowns have caused serious disruptions in value chain of businesses. Therefore, entrepreneurs & founders of businesses have changed their preferences & switched to venture capital funding and continuously striving for potential financing options that do not require raising equity. Therefore, these are some of the fluctuating trends among the startups/small businesses during the pandemic situation. However, a considerable number of companies perceive that they have minimum revenue-based financing solutions exposure. This scenario is changing and 2019 has witnessed an increase in sale of revenue-based financing solutions, owing to continuous increase in number of startups and small business, demanding revenue-based financing solution, and is expected to maintain its dominance during the forecast period.
The revenue-based financing market is fragmented with the presence of regional vendors such as Lighter Capital, Ken Capital Technologies Pte Ltd, and SaaS Capital. North America and Europe dominated the revenue-based financing market, in terms of revenue in 2019, and are expected to retain their dominance during the forecast period. However, Asia-Pacific is expected to experience significant growth in the future, owing to emerging economies, increase in government support toward startups & small business for raising funds in the region. Furthermore, the revenue-based financing market is particularly brisk in countries, such as India, Australia, China, Japan, Indonesia, Taiwan, and Singapore, with high GDP growth and rise in per capita income.
Some of the key players profiled in the report include Capria Ventures LLC, Decathlon Capital Partners, Fleximize, GetVantage, SABINE CAPITAL PARTNERS, LLC, Uncapped Ltd., and UPLIFT1. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.
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