Coho Growth ads

Equity has an interest rate. If you took $1m for 20% of your company, and exited for $50m, what’s the rate? Years to exit - - - - - Implied annual interest rate 5 - - - - - 58% 6 - - - - - 46% 7 - - - - - 38% 8 - - - - - 33% 9 - - - - - 29% 10 - - - - - 25%

"We wouldn't have made it across the finish line if we didn't receive the funding from you guys." - James Jacobs, Founder, Ziva Dynamics In 2018, Ziva was at an inflection point. They were in conversations with Unity to build out a creative tooling ecosystem. James knew a big win was right around the corner, and he wanted to be in the driver's seat. Our team provided a $2m debt facility to go after that opportunity, investing in product re-engineering and go-to-market for accelerated growth. Ziva Dynamics was acquired by Unity Technologies in 2022, representing a strong outcome for every stakeholder: founders, employees, and investors. Read the full story on our blog

Most capital historically has chased the classic "valley" software company. That isn't where we spend our time. At Coho Growth, the growth debt we provide fits vertical market B2B SaaS in the US and Canada. We've backed Bay Area companies before. But most of our portfolio looks different. Their teams sit outside the Bay Area, and they build for one industry, not the whole market. The fit is simple. Vertical SaaS is less capital intensive, with stronger unit economics. Debt can fund growth without forcing dilution at every step. A few verticals we know well: insurance, hospitality, real estate, education, legal, healthcare, dental, food supply chain, construction. Where we fit: $2M to $20M ARR. And beyond any single industry, what matters most is the stability of the recurring revenue. That's the real metric we look for.

How much more cash do you get to keep if you take debt rather than equity? At $2m ARR you don’t give away 20% of your current valuation - you give away 20% of your exit! Equity Raise $1.5m at $2m ARR, $6m pre-money for 20% dilution Grow to $7m ARR, exit at 5x = $35m Founder's cost: $7m for $1.5m raised Debt Raise $1.5m of debt in tranches as you grow Grow to $7m ARR, exit at 5x = $35m Founder's cost: ~$650k in total interest for $1.5m raised Debt takes security on the company. Equity takes the risk!

“Application software most exposed to AI disruption, and it is also where lenders have the most money at risk: $146 billion of loans outstanding” - Torsten Slok, Chief Economist, Apollo Yes, but application software accounts for roughly 75% of all software loans tracked by the Morningstar LSTA US Leveraged Loan Index. So of course it would be where most money is, because that’s where there are simply more companies. It’s mostly going to be traditional venture debt, which requires a VC sponsor. Those are growth-at-all-costs companies, not efficiency-first ones. We’ve taken a different approach. We avoid: - B2C (poor retention) - Horizontal SaaS (crowded, typically VC backed) - MarTech & SalesTech (hyper competitive, poor retention) - VC backed generally What we have learned to steer clear of: - Real estate tech (akin to B2C) - Companies selling to other SaaS companies (exposed to buy vs build) - Long term loans (we’re now capped at 4 years) Bootstrapped, capital efficient, or “seed strapping” B2B SaaS companies aren’t the same risk profile as VC-backed, Venture debt companies. We’re backing Vertical Market B2B SaaS companies, growing efficiently, that are looking for a meaningful exit.

Hey it's Mark Bakker. Raise $1-3m of growth debt, avoid further dilution, and continue to grow.