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Why We Invested in Karmen

Cyprien Hallé
January 26, 2022

Yesterday, Karmen announced their €22m Seed round, and we are very excited to lead the round alongside Fasanara Capital and outstanding business angels such as Edward Lando, serial angel investor with Pareto Holdings and Guillaume Prince, ex-head of Stripe Southern Europe.

As we welcome them to the Samaipata family, we wanted to share with you our investment thesis on Karmen and some thoughts on revenue-based financing (RBF) in Europe more generally.

We see this new form of financing as very complementary to what we’re doing at Samaipata. As VC we invest in trends that are more disruptive, more risky and less predictable providing capital and support . RBF players such as Karmen take care of “Arming the rebels” (See Alex Danco article “Debt is coming” here: on tech trends that are shifting towards a more mature technological stage, more predictable (i.e. the managements know that €n as input will turn into €m in output) providing non-dilutive financing for more predictable revenues. We are convinced that together we can help founders build tech-enabled solutions to make Europe the best place to start a tech business.

Note: If you are a reccuring-revenue / subscription-based company, and you want to access non-dilutive financing, you can get in touch with Karmen team here:

Debt is coming

RBF is not a new model: it became a fairly common means of funding entrepreneurs in the early 20th century, especially in the oil, mineral and mining industries, faced with a scarcity of capital options to fund operations; it is also already used extensively in the pharmaceutical, cinema, and music industries. Yet, if investors began implementing RBF structures on early-stage technology companies in the 1980s, the model seems to have really picked up after 2015 on this specific segment.

Source: Revenue based investing, State of the industry, 2018

The main reasons for this renewed momentum include:

  1. Real time data accessibility with the emergence of CMS & Open Banking platforms, and the increasing interconnection of SaaS platforms. This is enabling smart data collection through APIs allowing to analyse “financial data” but also “subscription” data (e.g. LTV, churn, net retention etc.), and is ultimately allowing new ways of scoring businesses.
  2. Growing penetration of subscription-based model (SBM) businesses with the rise of the “Subscription economy” (which has x6 over the last 9 years; Gartner 2021). A new, sizeable segment of tech companies with recurring, and predictable cash flows has emerged.
  3. Speed of development of SaaS businesses getting faster (+25% yoy growth; Gartner 2021), with the frameworkization of web technologies and the advent of Low/No code tools.
  4. Growing awareness of RBF in debt funds portfolio allocation as decreasing yield of traditional debt financing due to the very low interest rates.

Essentially, startup spend ROI has become more predictable as it has shifted from R&D to SG&A in the last 5–10 years, and as the ROI of SG&A spend becomes more predictable, a non-VC financial layer has emerged (e.g. within Silicon Valley), similarly helping to fuel its growth. This new suite of services is benefiting from a tech-specific approach: real-time debt offerings based on operating KPIs, securitization of software ARR, and retail investor-facing SaaS bonds eventually.

This strong “Why Now” has explained the emergence of a new wave of next gen. tech-enabled RBF players, for now mostly in the US, reaching impressive traction levels in no time: Pipe launched in June 2020, reaching >$2bn valuation 2 months ago, with c.8,000 clients, and $2–3bn of traded ARR. Those players are leveraging technology to increase velocity and are building switching costs on the product side.

France is the right place to start such a model

We believe that this success — mostly American to date — can be replicated in Europe. There seems the overall “debt” market in France and in Europe is gaining momentum with several French politicians recently expressing their willingness to encourage these products in France, leading to an ease of regulation. More generally speaking “Debt is coming” (see Alex Danco article above): it seems we are entering the “deployment phase” of what he calls “production capital” for the long tail of SaaS businesses and e-merchants, for which there is now limited speculation involved. European tech businesses (which can fit either in the “default local” category or “default global”) are a good fit for raising debt capital: the default local businesses (e.g. Alan) are reassuring for lenders because it usually comes with reliance on tangible assets and/or compliance with regulation and/or fitting in with specific local customs. That makes the business easier to defend, with thus easier to predict cash flows than when competition happens at a larger scale. The default global businesses need capital even more to scale beyond domestic markets; and could be targeted by RBF companies in the long run.

Overall, it is clear to us that recurring revenue securitization is the future. The biggest barrier to adoption in Europe is still cultural: the stigma that “venture debt is like a delicious sandwich that only costs ten cents, but occasionally explodes in your face” (Paul Graham) is deeply tied to the predatory reputation of old-school venture debt lenders (which had very punitive terms). Pipe and ClearCo. (ex. Clearbanc) are already starting to destigmatize securitization, and it will only become more culturally normalized in the coming years.

Karmen positioning will lock the SaaS and eventually subscription vertical

Money has been pouring in the space and competition — although mostly American to date — may quickly arise in Europe. Some players are betting on a fully digitalised approach with regards to i) scoring, ii) client onboarding, iii) client monitoring, and iv) refinancing. This is potentially enabled by a strong back-end automating data collection & analysis data through APIs connectors.

Our bet on Karmen would be that there is high value in a tech-enabled, highly verticalised player (on recurring cashflows businesses) as this specific positioning would eventually trigger strong network effects and switching costs. Indeed, the model’s verticalisation will unbundle access to cheaper capital: 1. lending model focused on “subscription lending”, 2. best scoring & underwriting, 3. best cost of capital, 4. stronger value prop. to subscription companies and ainsi de suite. Karmen is the first French player to be positionned on that specific segment and is in measure to lock the SaaS and eventually the subscription vertical.

Karmen team is one of a kind

Bears would say that a winning team in the space needs to have extensive expertise in financial services & a strong financial services network, allowing the company to raise debt quickly at a competitive cost. However, although fairly young, we quickly realized that Karmen founding team has exceptional execution, a very sophisticated understanding of the lending market, and has demonstrated their ability to secure debt very quickly with a top tier institutional investor (i.e. Fassanara Capital).

We are very excited to onboard them to the Samaipata family and looking forward to work with this super ambitious team on their pan-European plans.

Why you should use Karmen?

For businesses with recurring revenues, Karmen’s technology solution is simple, effective and secure. Its plug-and-play digital platform allows players to share their suite of tools in minutes: billing (Stripe, Checkout, GoCardless, etc.), accounting, and banking (via OpenBanking). The data received is then processed by a proprietary scoring algorithm that quantifies the credit risk and determines in less than 48 hours whether the actor is eligible for financing or not and by the way, the platform is completely secure: the data is retrieved anonymously, without manipulation by an external person, which considerably reduces the risk of fraud.

Today, they are the only player in France backed by a financial institution, in this case Fasanara Capital, which allows them to offer ultra-competitive financing offers to companies, ahead of the internationalization of their solution in Southern Europe.

So if you’re a recurring-revenue / subscription-based company (SaaS, B2B services, B2C subscriptions, apps, gaming, etc.), and you want to access non-dilutive financing, you can get in touch with Karmen team here:


At Samaipata, we are always looking for ways to improve. Do not hesitate to send us your thoughts. We strive to partner with early-stage founders and to support them in taking their business to the next level. Check out more ways in which we can help here or for all our other content here.

And as always, if you’re a European digital business founder looking for Seed funding, please send us your deck here or subscribe to our Quarterly updates here.

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