Capital As A Service: Is This The Future Of Investing?
Technology is making its way into industries at a faster rate than many anticipated. As tech trickles into finance, the development of powerful software soon followed one of which is Capital as a Service. With help from quick and in-depth analysis from all parties involved in business ventures, investors can make more informed decisions without factoring in the risk.
Instead of holding onto your funds and waiting for profitable and promising opportunities to make an appearance, you could find something to put your money towards by simply checking out the analysis of CaaS software. With clear-cut data-driven revenue projections and a look at the company from surface to root, your investments will see a better turnaround and continue to grow more than you imagined.
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Capital as a Service (CaaS) is a new age way for startups and small-scale businesses to tap into capital when it’s needed. Using the help of consumption-based algorithms facilitated by sophisticated technologies, companies can get a quick and highly accurate look at their credit risks, understanding which direction to move in to make their funds work for them.
Many startups run into issues securing funding. It takes a lot of man-hours, with entrepreneurs spending most of their time and energy on planning and fundraising. With CaaS, startups can forget about the need to secure funding thanks to a multi-faceted online credit facility.
Considering both borrower and lender, this innovative technology acts swiftly to deliver a detailed analysis of credit risk and potential earning power. It doesn’t just stop there, digging deeper into the core of startups to provide a clear path to spreading out their roots and growing their revenue. The technology works to help lenders choose the best investment while paving the way for borrowers to make profitable data-driven decisions.
Like most technologies, CaaS was created to help solve a common issue. If you ask anyone trying to raise funds and secure investments from companies or venture capitalists, you will hear one common complaint, fundraising. The issue branched out on both sides, with both lenders and borrowers taking time to make their decision and needing time to get a feel for the collaboration.
These issues only stall business and investments, taking lots of planning, presentations, meetings over coffee, and more. Securing funds to get things rolling when businesses are just starting out, and without them, they are stuck looking for other options. With help from a technology that speeds up the process, both investors and small businesses have something to look forward to.
One of the biggest benefits when it comes to investing in today’s swift business market is the collection and analysis of data. Today, startups and venture capitalists are connected more than ever before, with information passing back and forth between them easily.
The increased sharing of data between companies and the passing of useful information helps secure investments, score insights to the future of business, and even provides a clear-cut direction for both parties to get the most bang for their buck.
Advances in technology have opened many doors of opportunity for startups and businesses. When you decide to incorporate Capital as a Service into the mix when deciding where to invest, you can expect to reap a long list of benefits, a few of which are listed below.
CaaS technology is meant to dig deep to uncover a business’s inner workings. Instead of relying on a gut feeling or the effectiveness of a PowerPoint presentation, investors can enjoy accurate details about their investment, along with their potential to grow their money as time goes on.
Learning where to invest is one thing but learning what weaknesses to focus on to make more profit and do dealings more efficiently, is a different ball game. For instance, instead of getting approval or disapproval, investors get a look at the pros, cons, and suggestions about how to take business dealings up a notch. They can hit on key factors that businesses look for like customer retention, growth rate, lifetime value, and even risk in a matter of an hour.
In the words of B2B SaaS Product Leader Ashley Carrol, “Face-to-face interactions and human judgment, followed by (at best) a few thin Excel models and relationship-driven diligence create a high propensity for bias and a low propensity for scale.”
The cutting-edge technology works with all data as it comes in, creating a clear and scalable means of investing. It’s accurate and works in real-time to look into both long and short-term investing-which saves you time and money.
Legacy investing involved the need for investors to brush up on their knowledge about what they are investing in. A look at the market and a detailed analysis of both present and future company goals were pulled together and a final decision was reached somewhere down the line.
With CaaS, investors no longer have to spend time researching for months before a meeting, plugging in and checking out earning potentials and risks in seconds. Unlike investment adventures in the past, investors can really be involved in the daily dealings of a company’s decisions, using the help of in-depth analysis of collected data.
Investments are known for coming with a bit of risk. In the past, investors really didn’t know the steps that they could take to reduce their risk and thought of taking chances as success. While a good risk-taker can still be successful, these days, investors can enjoy more insight into their investments with help from revenue-based financing.
Startups and small businesses have a lot to gain if they choose to partake in revenue-based financing, securing the funds and investments they need to continue on. That’s something that is attractive as an investor, knowing how your money will perform and what kind of return you can expect based on analysis is a ground-breaking approach to investing that’s going to change the game.
With all of the benefits for lenders and borrowers, many out there are left wondering if we are on our way into the future of investing. While it is still in its early stages, there may be kinks that need to be worked out. While most are not major, companies and investors will find ways to adapt and make small changes that evolve the software over time.
One reason why businesses and investors are loving this approach is the ability to take a lot of the “human” aspect out of it. No longer do companies have to pour earnings into treating potential investors to five-star meals, hotels, or long perfectly planned presentations. Instead, all parties can enjoy a quick look at what a partnership would look like based on collected data.
The first few trials of Capital as a Service proved that this technology could be a powerful tool to get money flowing and small businesses up and running quickly. Starting off, CaaS was just an idea, with one Social Capital correspondent writing, “a year ago, CaaS was a radical experiment.” While not many businesses followed suit, the first-year results surprised many and soon had them jumping on board.
What they saw was that companies of all kinds were sending in applications, hoping to get positive feedback from funding options that would help them get off the ground. Things worked better than anyone thought, with 76 approvals, each of them gaining $500,000 to start up with. Based on the analysis, the approvals went to outlier companies that might not have gotten the same opportunity had they done business the more traditional way.
Besides the ability to secure funds and get the ball rolling on securing investments, CaaS is also getting attention from onlookers thanks to its lack of bias. When applications go in, there is no labeling that takes place, just an analysis of data based on several factors that the company puts forth. In today’s multi-national business world, discrimination doesn’t have a place, and Capital as a Service puts it to an end for good.
When looking at findings from its first run in 2017, 47% of applications outside of the United States were approved, of which 80% had non-white founders. There were also 30% female founders in that group, making it look like history in the making. Instead of relying on feelings, vibes, or any other mythical aspects that went into investing and funding before data, the CaaS system simply gives a “yes” or “no” answer.
The algorithm doesn’t discriminate and is looking for the best outcome for both the company and the investor that will make their growth happen. Apart from a yes or no, this system had the ability to show where companies were falling short, giving them more insight than ever before and helping them find weaknesses to improve so they can continue growing.
Because of the key benefits and all the positive opportunities that come from Capital as a Service, it’s left many wondering when a magical shift will happen where it’s more readily used. Initial testing was done in 2017 and, over the last few years, it’s been toyed with to create an even better algorithm that gets down to the bottom of the results companies and investors need in less than a day.
Though throughout the years this software seems promising, it may not make its way to the forefront of investment decisions anytime soon. Some savvy CEOs, like Greycroft Partners’ Ian Sigalow, have deemed the service unusable, claiming that investing is about “really betting on people.” Investors like to see that those receiving their funds are ambitious and are motivated to do more with their money to turn it around and get their business off the ground.
Using algorithms to analyze data, companies can make data-driven decisions that help them get where they need to go. Still, relying on technology comes with a few pros and cons, so it’s up to the investors to make the final decision whether to incorporate it or not.
- A deep look into a company’s infrastructure, revenue, risk, and more.
- Lack of bias- investors look at numbers, not people
- Answers fast, without the need to spend money on impressing investors
- Data-driven suggestions that help companies find their weak spots
- Inability to get a feel for the company’s founding members
- Missing a personal or human touch
- Takes the personality and emotion out of investing
Though it’s not clear how long it will take for the software to start making the decisions, software like CaaS opens the doors to new and defining ways of funding startups and honing ideas. Companies that do not choose to go for the first incorporation of this new software will still have to rely on those “gut feelings” to find investments that may or may not result in the turnaround they expect.
As far as something to think about, Capital as a Service provides key upgrades and changes to the way that traditional businesses secure funding, relying on data to help them make the best and most profitable decision. For a look into venture capital that is unmatched, investors can turn to technology and skip all of the fundraising events.
Traditional ways of investing are out of the door and some kind of groundbreaking discovery is bound to happen very soon. Whether it’s CaaS or another new up-and-coming technology, investors should keep their eyes open for things that help them spot risk and earning potential in a matter of hours instead of months.
About the Author
Jonathan Hung is one of the most active angel investors in Southern California, his mission is to drive value creation within each portfolio company. In support of this mission, he serves as Co-Managing Partner at – Unicorn Venture Partners.
Jonathan and his team target investments in US companies that have global market potential with a focus on long-term growth expansion to East Asian markets.
Jonathan developed his investing prowess as a Managing Member for his family office fund, J Heart Ventures, which made investments in start-up companies such as Gyft, ChowNow, Miso Robotics, Clover Health, Bitmain, to name a few startups he funded.
Jonathan has various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania.