2025 comes to an end, and it has been one of the busiest years in re:cap history. We expanded to the UK. We launched a new €125 million credit facility. We rebuilt our platform and implemented Capital AI. You know all this already, because you've been reading along.
But here's what I realized somewhere between writing the December issue and planning Christmas dinner: this newsletter has become... safe. Predictable. A greatest hits compilation of funding and re:cap headlines.
So, we’re changing it. "The Capital Stack" delivers one dedicated topic per issue. More opinion and unique views, less news aggregation. The kind of deep dives that help you make better capital decisions at 2 am when you're stress-modeling your runway. Plus, a short, insights- and numbers-driven case study on how a company makes its funding decisions.
This is the first one. Scroll down to read more about why the capital structure game is changing, and what that means for you if you're sitting at €2M ARR wondering whether to raise or borrow. I also break down how Hello Klean scaled to 1M+ units sold while keeping 100% ownership.
If it's useful, forward it. If not, let me know what you'd rather read about.
Cheers,
Christoph, Content at re:cap
Here's something that has bothered me for years: Why do SaaS companies with €10M in predictable ARR struggle to get a €2M loan? The answer reveals everything wrong (and newly right) about how we think about capital structure.
Traditional finance treated capital as binary:
If you built software, you sold equity. If you built physical products, you borrowed money. This created a structural disadvantage. Equity capital costs 20-30% per funding round. Debt costs 12-18%. SaaS companies paid equity prices for everything because lenders couldn't see recurring revenue as collateral.
Now, that's changing.
Modern debt providers underwrite against the metrics tech CFOs already track: MRR growth, net revenue retention, CAC payback, or cash burn rate. Your dashboard became your credit score. Asset-light companies that once chose between dilutive equity rounds now have different funding options, e.g. revolving credit lines.
The inflection point has moved earlier. Smart SaaS companies now run debt-to-equity ratios around 0.1-0.5 in the early stages, then scale to 1.5-3.0 as they hit growth milestones. This isn't reckless leverage, it's strategic capital allocation.
► The unlock happens at €2-3M ARR.
Once you cross that threshold, CFOs layer in debt to extend the runway between equity rounds. You push your next raise further out, hit higher valuation milestones, and face less dilution. Do that across three or four funding rounds, and you're looking at maintaining majority control versus becoming a minority shareholder in your own company.
Your optimal capital structure isn't static. It shifts with stage, business model, and what's available in the market. But here's the thing nobody tells you: capital structure decisions compound.
The decisions you make at €2M ARR determine how much equity you own at €30M ARR. Get it right early, and you maintain control and capture more value. Get it wrong, and you're fighting uphill for the rest of your company's life.
Calculate your current debt-to-equity ratio and WACC. Compare against industry benchmarks. Model a hybrid scenario for your next funding milestone. The math will tell you whether you're overleveraged or underleveraged relative to what's now possible.
The game has changed. The question is whether you're playing by the new rules yet. If you want the breakdown, here is a guide with debt-to-equity ratios by sector and stage-specific capital structure strategies.
Read the capital structure guide.
Hello Klean, a London-based beauty brand, hit £75K to 1M+ units sold, entirely bootstrapped. They run a subscription business with 70% recurring revenue and 97% retention, but cohorts don't turn profitable until month 6-8. Every lender they talked to maxed out at 6-12 month terms. They were being forced to repay before customers became profitable.
Secured a £1.5M credit line from re:cap with up to 60-month terms. Finally, debt that matched their actual customer lifetime – not their quarterly cash crunch.
Maintained 50-50 founder ownership. Invested confidently in CAC without repayment anxiety. Expand to Middle East and EU markets and hire. Growth stopped being a luxury and became the plan.
Short-term debt forces short-term thinking. If your payback period is 6+ months, your financing term should be too. Match capital structure to unit economics, not lender convenience.
.gif){kind=icon}
