Arc emerges from stealth with $161M to launch a full-Service finance platform for SaaS and help underserved startups get access to funding

For many years, startups are underserved by traditional financial institutions and founders struggle to raise funds. And for some founders who are lucky enough to raise money, many of them face costly dilution and end up losing their equity after many rounds of funding. Now, one startup is on a mission to help other startups facing these challenges.

Enter Arc, a San Francisco-based startup and a provider of a full-service finance platform to help startups grow. Arc provides a better way for SaaS founders to raise capital by avoiding costly dilution and risky debt. Arc’s goal is to become the operating system for the SaaS startup, where founders can save, spend and manage cash while leveraging proprietary insights to grow efficiently.

Today, Arc announced it has emerged from stealth today with $161 million in total funding from equity and credit investors. The round was backed by NFX and Y Combinator. In conjunction with the funding, Arc also announced that NFX founder James Currier has joined its Board of Directors.

In addition to NFX and Y Combinator, the equity round also included participation from Bain Capital Ventures, Clocktower Technology Ventures, Torch Capital, Will Smith’s Dreamers VC, Soma Capital, Alumni Ventures, Pioneer Fund, and Atalaya Capital Management. Atalaya also provided the credit portion of the investment.

A large number of high-profile angel investors also contributed to the round, including over 100 founders from Y Combinator-backed companies such as Vouch, Observe.AI, Eden Workplace, Teleport, RevenueCat, QuickNode, Dover, Middesk, Instabug, and Rainforest QA, as well as multiple founders of decacorn fintechs. The ex-Stripe angel syndicate also invested in the round.

In partnership with Stripe, Arc is building a first-of-its-kind fintech solution where software founders can borrow, save, and spend on one comprehensive digital platform. Its introductory product, Arc Advance, allows SaaS founders to seamlessly convert future revenue into upfront capital without dilution at the click of a button.

Founded in 2021 by CEO Don Muir and Nick Lombardo, Arc is on a mission to help startups grow by converting future revenue into upfront capital at the click of a button. Arc is funded by NFX, Bain Capital Ventures, Clocktower Technology Ventures, Torch Capital, and Y Combinator, among others.

The inspiration behind Arc’s mission has been years in the making. Co-founders Don and Nick previously worked in private equity in New York where they experienced firsthand the limitations of traditional capital raising. Meanwhile, Raven spent a decade in Silicon Valley as a software engineer and witnessed the emerging trend towards consumerized enterprise software.

Today, cloud services are among the world’s fastest-growing markets — estimated to reach $400 billion in revenue in 2022 and growing 20%+ year-over-year, according to Gartner. However, innovation in SaaS companies has outpaced the funding solutions supporting them.

Historically, high-growth software companies in their earliest stages turn to venture capital and occasionally venture debt to fund their growth. These traditional sources of capital leave startups with expensive and offline solutions that limit their ownership, control, operating flexibility, and ultimately growth. Arc provides SaaS founders with a digitally native tool to fund growth without dilution, tapping into future recurring revenue to pay for operating expenses today.

As the full-service finance platform purpose-built for SaaS startups, Arc is building a community of premium software companies where they can borrow, save, and spend all on a single technology platform. Arc is transforming Wall Street for Silicon Valley — marrying the capital available to mature companies with the consumerized technology experience demanded by technology startups. The company is quickly becoming the home for SaaS founders’ finance needs.

“We’re on a mission to help startups grow,” says Don Muir, Arc co-founder & CEO. “Arc provides SaaS startups with the funding alternative they deserve, empowering founders to scale without selling an ownership stake in their business or risking insolvency with legacy credit products. Arc was purpose-built for software founders. Our fintech platform eliminates the friction inherent in traditional capital raising while broadening access to non-dilutive capital, helping founders preserve ownership in the business they’ve worked so hard to build. And this is only the beginning — in the coming months, we’ll be launching a full suite of financial tools to empower SaaS founders to scale their businesses efficiently and retain control. We want founders to know that when it comes to accessing and managing capital, Arc has your back.”

Arc has also partnered with Y Combinator, which shares Arc’s mission to help startups grow. Arc was an early member of YC’s Winter 2022 batch, which commenced earlier this week. Jared Friedman, General Partner at Y Combinator, notes, “The Arc team’s top-notch execution and the strong market need for this product have caused the YC community to rally behind their success.”

Since launching last summer, over 100 startups have signed up for the Arc platform. In the fourth quarter of 2021, the company increased its total funding to customers by over 110x — a period where funding was limited to select launch partners and a waitlist proliferated. To date, the largest segment of customers has been VC-backed B2B SaaS companies seeking to accelerate their growth spend while also prolonging their runway before raising additional equity.