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How heyData used re:cap to secure a stable cash balance on its way to profitability


in a nutshell

heyData supports small and medium-sized companies to meet their compliance and data protection requirements. The Berlin-based startup has developed an all-in-one solution that covers consultation, workshops, and document storage in one platform. Over 40 employees ensure that more than 1,000 customers can simplify their workflows and automate their processes.

The challenge for heyData

Secure a stable cash balance and keep an eye on the cost of capital

heyData used different sources to finance its business: Business angels, venture capital, and alternative funding solutions such as revenue-based financing

To further improve its cash flow while keeping the capital costs efficient, heyData was looking for a new funding instrument. 

With this funding instrument, heyData wants to:

  • achieve a stable cash balance to compensate for the negative operating cash flow
  • secure a flexible financing line to be liquid at any time

“Based on these goals, we plan to break even in the medium term. We oriented our capital needs on those objectives too," says heyData founder Daniel Deutsch. And as he and his team had previously been active in using alternative debt financing, re:cap was on their table anyway.

heyData founder Daniel Deutsch

The solution

A cost-efficient funding that matches their business plan 

The final decision for re:cap was made because of the transparent and clear presentation of contracts and heyData’s financial metrics. Besides that, re:cap “consistently understood how to generate advantages for its customers," Daniel stated.

A close exchange about its business model and the associated goals was particularly crucial for the Berlin-based startup. Daniel already knew "what we wanted to achieve with additional debt. But to go into more detail on how to achieve those goals, we closely worked together with re:cap." 

At this point re:cap Guidance came into play. To determine as precisely as possible what funding amount would make sense at what point, heyData shared its business plan with re:cap. 

"Our plans called for financing that would adequately fund our negative operating cash flow, securing us a stable cash balance."

re:cap's experts developed a funding plan detailing in which month the startup would need which amount of capital to ensure an even cash balance. This funding scenario ensures the company avoids urgent capital needs due to a sufficient cash buffer.

heyData and re:cap agreed on the following:

  • The optimal cash flow or minimum amount of capital to be available at all times
  • The amount of funding and when the money would be drawn 

heyData draw funding multiple times since November 2022 with a total volume of 700,000 Euros. It allows the revolving funding volume to decrease or increase as needed. 

Daniel Deutsch sees three advantages to this approach:

  1. "We avoid overfunding and thus unnecessary capital costs."
  2. "We get the freedom to act how it is best for our company. For example, if I see a new opportunity and want to hire a product manager. Initially, this hiring would increase my capital needs. The re:cap funding allows me to adjust my financing line. I can modify the capital amount in a given month to match that. This way, I get the funding that fits my business."
  3. "I take fewer risks compared to other alternative financing instruments. With venture debt or growth loans, there are covenants. I get the whole funding amount all at once, too. Those aspects increase my risk as an entrepreneur if the business plan doesn’t evolve as planned."

heyData has a solid business plan with sustainable growth. With re:cap Guidance at hand, the startup has an instrument to keep it that way:

“We monitor our development monthly and exchange ideas with re:cap on how to succeed with our financing line if the market changes, or how to handle an unexpected investment. In doing so, I can rely on the expertise of the re:cap team and won't get into trouble if something develops differently than planned," says Daniel. 

heyData showcases how to use re:cap as a long-term partner. Besides evolving towards breaking even, Daniel’s goal is clear: "We want to reach certain KPIs to prepare for the next equity funding. Of course, VCs appreciate it if we are profitable. Ultimately, that makes fundraising much easier for us."

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