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Gynger secretly starts lending companies money for software • InNewCL

Gynger secretly starts lending companies money for software • InNewCL

#Gynger #secretly #starts #lending #companies #money #software #InNewCL Welcome to InNewCL, here is the new story we have for you today:

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Software spending is becoming a prime target for cuts as it becomes a larger item in corporate budgets. According to a recent report, customers are investing 53% more in software-as-a-service (SaaS) licensing than they did five years ago. Management has aggressively run down; 57% of IT teams told Workato in a 2022 survey that they are under pressure to significantly reduce software spend in their organizations.

Reducing software spending is a task easier said than done in organizations where teams and even entire departments rely on specific software to get their jobs done. The solution, argues Mark Ghermezian, is first and foremost to avoid cutbacks — with business loans. But not just any loans — business loans made specifically for the purchase of software and infrastructure.

Ghermezian is the founder of Gynger, a New York-based platform that provides companies with capital to source software and service products for their bespoke tech stacks. Gynger is today with $10 million in debt from Upper90 and $11.7 million in seed funding co-led by Upper90 and Vine Ventures with participation from Gradient Ventures (Google’s AI-focused venture fund), m]x[vCapitalQuietCapitalandDeciensCapital[vCapitalQuietCapitalandDeciensCapital[vCapitalQuietCapitalundDeciensHauptstadt[vCapitalQuietCapitalandDeciensCapital

Ghermezian previously founded Braze, a cloud-based customer engagement platform for multichannel marketing. There, he says, he saw how difficult it is to sell software and, on the other hand, how difficult it is for buyers to buy the software.

“As I was going through this pain while managing our budgets and thinking about cash flow and runway, I experienced firsthand the shortcomings of the business-to-business SaaS market,” Ghermezian said in an email interview with InNewCL. “As a founder, you’re raising all this money and you have to spend a lot of capital right away to build your tech stack. We wanted a way to combine software with capital to serve the startup ecosystem and help them get the best software while growing and managing their cash flow.”

Gynger’s core product is an automated underwriting model for financing software and infrastructure purchases. The company provides enterprise customers with a line of credit and debt financing that allows them to prepay their SaaS bills and repay Gynger later. (Ghermezian says the debt incurred by Gynger will be used to fund them, although Gynger can and does borrow from its balance sheet.)

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Ghermezian lists what he sees as the biggest benefits of the Gynger platform, including giving customers access to upfront vendor discounts and the ability to spread lump sum payments over a period of three to 12 months. Gynger also provides a unified dashboard for SaaS spend, consolidating them into a single monthly payment.

There is some customizability with Gynger. For example, customers can choose to pay suppliers upfront at a discount throughout the year, distribute existing invoices, and choose which contracts Gynger will fund on their behalf. Ghermezian says Gynger’s decision-making algorithm considers cash, burn rate, and revenue to determine how much capital a company is eligible for.

The alternative finance market has exploded as macroeconomic headwinds prompt companies to seek basic forms of capital. Ghermezian sees Gynger in close competition with fintechs like Pipe and Capchase, both of which fund companies outside of equity and venture capital. However, he notes that many lenders focus on buying a company’s receivables (i.e. goods and services owed) and lending them against their annual recurring revenue. While Gynger takes revenue into account when making its lending decisions, a company is not required to have it.

“Companies of all sizes can benefit from Gynger, but we’ve seen particular success at pre-Series B companies,” Ghermezian said. “With Gynger, any business of any size can access non-dilutive capital, acquire the software and infrastructure it needs to run its business, and pay on its terms.

Lending to a company with no revenue may sound risky. And Gynger’s website presents the platform as a way for vendors to upsell customers through flexible financing to incentivize larger purchases, which also appears risky.

But Gradient Ventures’ Darian Shirazi said he believes Gynger is taking a measured approach to allocating capital.

“The software model for annual billing per seat is evolving, and we believe Gynger will offer companies new ways to purchase software that best fits their financial situation,” Shirazi added in a statement. “Many have attempted to innovate the underwriting model for software financing, but the true multi-billion dollar opportunity lies in offering a variety of payment and financing workflows based on customer needs. Gynger is revolutionizing the way customers pay for and buy software and we are very excited to be working with them.”

In any case — risks aside — lending for software spend seems like a fairly safe business case, as Gartner predicts global IT spending will grow 4% to $4.5 trillion by the end of 2022. This is certainly a large and growing addressable market.

To date, Ghermezian says Gynger has funded SaaS deals ranging from as little as $1,000 to $1 million from vendors including Airtable, Google Cloud Platform, Amazon Web Services, Slack, and Zoom. He declined to disclose Gynger’s earnings but maintained that the 13-person company was “super healthy” in terms of cash flow.

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