Capital-as-a-Service: What is It and How Does It Work?

Posted September 1, 2023 Growth Capital,Capital as a Service by Yardline Team

From Silicon Valley and beyond, embedded financial services have created richer user value propositions and a more streamlined consumer experience for ecommerce platforms and startups over the last few years. However, this FinTech revolution has remained largely focused on elements of the consumer interface: point of sale, payments, and P2P transfers.

Leading a new wave of B2B innovations, Yardline’s Capital-as-a-Service takes these FinTech trends and applies them to the online business model. For consumers on CaaS-upgraded platforms, getting growth capital (a more dynamic venture capital alternative) is as simple as processing an online payment.

What is Capital-as-a-Service?

Capital-as-a-Service is an API-based financial services infrastructure that can be integrated directly into marketplaces, SaaS platforms, and other digital applications with ties to the ecommerce ecosystem. When paired with software development kits (SDKs), companies can easily embed and scale white-labelled financing solutions for their users.

The benefits of Capital-as-a-Service

Capital-as-a-Service empowers marketplaces to become hubs for seller success. By utilizing the metrics inherent to the marketplace or platform, Yardline can deliver pre-approved capital offers to clients in as little as 24 hours. Differing from corporate venture capital, funds are unrestricted use, meaning sellers can quickly and easily invest in scaling, stocking up, and marketing their goods.

In addition to fueling seller growth, embedding a capital solution allows marketplaces to:

Keep pace with Silicon Valley fintech and leading platforms like Amazon and eBay – Large ecommerce marketplaces recognize the increasing need for early-stage fundraising and currently offer proprietary embedded financing options.

Focus on the core business – Capital-as-a-Service allows for scalable financial services capabilities using fewer internal resources.

Increase on-site advertising – Sellers who take growth capital generally spend roughly 60% of the funds on advertising.

Reduce high-performing seller churn – Embedded capital allows you to facilitate growth in sales for your top sellers; as their sales increase so does the value of your marketplace, making them less likely to churn.

Am I a fit for Capital-as-a-Service?

SaaS and FinTech platforms alike (especially early-stage startups) can benefit from the addition of an embedded capital solution. FinTech platforms can instantly expand their product offerings without having to build out the infrastructure and cashflow required for a growth capital specialization, whereas SaaS companies can use embedded capital as a lever for growth.

Because of the flexible nature of an API-based solution, Yardline’s Capital-as-a-Service product is also not restricted solely to growth capital use cases.

As an example, Perpetua, an ecommerce ad optimization software, utilizes the pre-qualification API to not only give their users access to capital but to demonstrate the value of their intelligent marketing services.

Similarly, Flippa, a marketplace for buying and selling online businesses, can now offer a range of easily accessible capital solutions to the users of their platform, including acquisition funding, growth capital, and seller solutions for entrepreneurs.

Capital-as-a-Service in 2021

Ecommerce platforms and marketplaces depend on seller growth and engagement to sustain their revenue. Lucky for them, the metrics are clear: ecommerce entrepreneurship is only increasing. For scope, in 2020, 169,782 new sellers joined Amazon’s marketplace alone, never mind the hundreds of thousands joining the ecosystem in 2021 via eBay, Shopify, Etsy, and others.

To stay abreast of the seller demand, “We believe that every ecommerce-related platform will become a FinTech platform,” says Tomo Matsuo, President at Yardline.

Yardline’s CaaS product helps marketplaces and platforms stay ahead of the game, addressing the most common pain point for business owners trying to scale: access to flexible, non-dilutive growth capital—quickly and conveniently.