How Alternative CEO Baxter Lanius grew to $4M revenue and 10 customers in 2025.

hey folks my guest today is back just baxter lanius he's a ceo and founder of alternative alternative drives uh alternate alternative drives revenue growth for sas companies by offering flexible b2b payment solutions for end customers and arming sales teams with an additional tool to convert customers previously he was at a fintech technology investor at apollo global and victory park capital baxter are you ready to take us to the top yeah that sounds great thanks for having me nathan all right there there are so many i mean as you know fintech is like hot hot hot right now so did you sort of see these evaluations multiples at apollo and victory and say i need to ditch the investor thing and jump in an operator role a little bit you know it's an interesting story i've been following fintech over the last 12 12 years or so i really started investing in fintech in 2014 and saw the boom of the industry at the time i was pretty unimpressed with the platforms that were founded in that timeline because ultimately many of them were just customer acquisition moats and strategies around websites and podcasts and news et cetera and there were not really many companies that were actually innovating in this space so i decided to leave victory park actually and start investing in technology companies at apollo and then i saw this whole kind of wave of fintech 2.0 as i'll call it where there's just a tremendous amount of innovation and opportunity in the space to really disrupt the number of banks that are currently the incumbents and we just started started to to really focus on on b2b payments and b2b payment solutions to ultimately innovate you know the very antiquated process that is b2b invoicing and payment flows and so this is our first foray into the space and first product launch which we're launching more more broadly in the in the next week or two and it's been a really really exciting journey and i think there's just so much innovation available and still untapped uh so tell tell me more i mean if people look at your website and they don't have a deep understanding of fintech they might go wait this is an invoicing tool freshbooks sort of is great here there's a lot of invoicing tools how are these guys different yeah so we we see our product as really a sales enablement tool uh to ultimately unlock customer acquisition drive and deliver flexible payment solutions to your end customers to drive revenue growth by increasing average contract values and decreasing the sales cycle so it's funny you bring this up i received a bill the other day for 10 and 50 cents from a publicly traded software company they said pay by wire i said 10 and 50 cents you'd like me to pay by wire that's going to cost me 20 to send the wire and they had no other payment solutions now that's just the tip of the iceberg in this market when you then look at you know a five thousand dollar invoice or a ten thousand dollar invoice you know they're really only two solutions pay by ach pay by wire and ultimately what we're doing is we're arming sales teams arming collections teams arming revenue ops teams to have another flexible payment solution to allow them to pay over time now what does this create and what does this do it it expands a whole new market for a lot of these companies if you're a sales force and you're interested in getting into the smb space a lot of people can't afford 80 000 up front and ultimately we offer pay overtime solutions that are fully customizable for that specific customer and it's just a really interesting interesting solution that doesn't exist today and and we've had just an enormous amount of growth on the customer side to generate and deliver revenue for for our customers the equivalent in the consumer space would be i'm buying a mattress for five thousand or four thousand bucks i use little affirm button to pay monthly over time that's sort of the equivalent here right that's that's exactly right i've affirmed killarna after pay or are the leaders in in the consumer space one of the key differences in the b2b space is you know affirm clarinet after pay use an iframe and kind of take over that checkout experience we view our tool as strictly complementary to the existing workflows of a business so we can actually get you on boarded and integrated within minutes as opposed to taking engineering hours to integrate in a long sales cycle so we can have you get started finance your customers in minutes and we view it really as a complimentary tool to expand tam expand market share and close customers a lot quicker than you you know historically were able to when you think about pricing negotiations as well as part of the sales cycle it is a significant portion of the sales cycle and if you can limit that by 50 or 20 percent by allowing customers to pay over time it's also an amazing value add oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 percent of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founder founderpath and we're thrilled to bring it to you all right we're gonna go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview so let's use an example here let's stick with your sales force example okay i'm an smb i really want to use salesforce but i'm not paying you know i can't and let's say my quote from salesforce is ten thousand bucks right for it for one seat annually smb can't pay that so i'm i'm going to stop engaging with the salesforce sales rep what you're saying is the salesforce sales rep could offer the purchaser right and smb the payment plan for that ten thousand dollars now what might that payment plan look like that's exactly right nathan and so the easiest way to to think about it is is our existing generic plan is is six months of payment terms so you would break that ten thousand dollar contract into six payments of about sixteen hundred dollars and we would front the capital to sales force on day one so salesforce is ultimately able to basically close that contract on day two so there's no not even net 30 days payables for salesforce they receive 95 of 10 000 so we take a five percent fee um so we'd wire them ninety five hundred dollars upon closing and then we'd collect from the customer sixteen hundred dollars over six months and that allows that small business to ultimately start to generate an roi on the salesforce crm solution and start to expand their business so now they can afford that solution they can drive revenue at growth at the same time another interesting example that you see all the time is even with really really large companies if you look at their software spend a lot of it's concentrated in january february or specific months and so their p l and their budget is you know call it negative a million and a half and then zero zero zero for software spent you know they want to attach an roi to that dollar spend and so that their p l's and their budgets are properly balanced and they're able to generate revenue based off of that spend so just to be clear i'm salesforce i'm using you guys i close a ten thousand dollar contract that i wouldn't have closed without you because the that the it's a new solution for the smb to actually be able to pay i as salesforce i'm gonna get a 9 500 check from you on day one alternative pays that um then you're gonna make is the s p is paying you directly smb is paying us directly okay so sixteen hundred for six months right or about nine thousand six hundred dollars right you fronted ninety five hundred to salesforce on day one right so there's two things where i'm curious where this money goes the hundred dollars extra that the customer pays above 9 500. where does that go and then where does that 500 go originally that you sort of discounted the contract yeah so we we would think about it we so we collect 500 right which is five percent of the 10 000. um and so the customers paying us you know in over the course of six months um 1600 you know it's one six it's just over sixteen hundred dollars so we ultimately earned five hundred dollars in in that transaction what we're seeing the other hundred though from the customer because they're paying you 9 600 against the 9500 advance so you're making another 100 from the end customer right the smb so we're making 500 from the smb from the uh sorry i thought that was for salesforce because you're only wiring salesforce 9500 bucks right we wire 9 500 to salesforce we then collect 10 thousand from the end customer oh sorry how do you get to ten thousand sixteen hundred times six months is only ninety six hundred bucks it's it's really right one thousand six hundred sixty six dollars and sixty seven cents okay got it so you are collecting the full that's what i was trying to figure out exactly you're not there's no you're rounding there's no margin built in here you're collecting the full 10k from the customer exactly and what we're seeing is is salesforce now has the ability to just pass through that payovertime solution to their customers so salesforce now has you know pay up front at ten thousand dollars or pay overtime at ten thousand five hundred dollars this way at a net net perspective sales force is still breaking even on the transaction but they're able to now finance their customers okay so the question here is how do you write that nine thousand five hundred dollar check to sorry the ten well you know the nine thousand five hundred dollar check to salesforce on day one what's your capital source so so we have we're funded with debt and equity um we've raised just under 15 million dollars a portion of that is an accredited facility and and so we fund that transaction through our credit facility okay so just be clear you've raised 15 million together that is the debt and the equity exactly okay and what what 5 million was equity something like that exactly and 10 million and 10 million is the total committed amount on the warehouse facility or that's how much you've already deployed that's how much it's drawn oh you've already drawn 10 million so you've already you know you're paying it's in the bank uh it's a little bit of a different credit facility than your normal course fintech credit facility um so we have available capital of 10 million dollars which is currently in the bank and we draw down that as we see demand for our product um and so you know we will be going through that pretty quickly here in the next next handful of months i was going to say so you think you can you can you can do 10 million worth of deals over the next couple months probably more probably more okay that's great what did you do last month do you know um i'd rather not disclose because we've been in kind of this private beta period with it with a handful of customers and now we're launched we've started our go to market strategy over the last four weeks and now we're launching more publicly okay well i'm gonna guess here do you think you can break a million dollars in new deals like new loans this month in april yes yes yeah yeah cool okay there you go there you go there you guys have it guys now you have a little benchmark there um right so okay this makes sense now the reason most credit facilities or warehouses or fintech entrepreneurs don't draw down that 10 million because they're paying unused like you're paying an interest rate no matter what whether it's deployed or not you just have a lot of confidence you're gonna deploy it quickly so you're okay paying your warehouse provider whatever the interest rate is and we ultimately don't have unused fees on our on our credit facility so you know we have basically a flat rate associated with deployed capital uh there are no upfront unused fees and incremental spend which i think you see in most obviously typical and traditional facilities especially facilities that i used to invest in uh so we we have a little bit of a different structure and set up that i would say is is preferential to both our end customers and preferential to the business ultimately we pass through a lot of these opportunities to to our end customers to ultimately give them better rates on these underlying transactions so you might have an advantage because of your you know your connections in the industry with apollo and victory park but most fintech entrepreneurs first-timers where they're raising their first credit facility like this they're going to pay something between a 10 and 13 interest rate on capital that's deployed right there cost capital and also there's probably like warrants and some covenants and things like that in that term sheet um is your cost of capital sort of in that same range 10 to 13 percent it's it's just below that um but that that that's exactly right i mean i would actually provide the market i mean it's more like 10 to 18 percent um typically advanced rates are between 90 and or 80 and 90 percent um depending on your credit underwriting ability and there's also a credit box associated with all these what was your advantage right you got 90 uh our advance rate is actually at 80 for for a number of strategic reasons but uh but yeah we had we had we had the ability to go up to 90 if we wait hold on i don't understand most entrepreneurs are going we want the highest advance rate possible otherwise we have to come up with 20 cents on every dollar but you're saying strategically you want to keep it low i don't i don't believe you why do you want to keep hello we're not providing all of the equity haircut capital so within that 20 we have an additional capital provider that splits that amount so if you you know using round numbers our facility call it is ten million dollars eight million dollars would be the senior tranche two million dollars would be the junior tranche we're not contributing the entire two million dollar tranche i also think that within any of these platforms you also do want to de-risk your underlying asset quality and underwriting and ability to to do diligence on these deals and so taking out you know as much leverage as what's available to you is not always the the best strategy no okay come on baxter who's the third party you stuck in here they must be like very strategic is it apollo or victory they're not gonna do a two million dollar two million tranche deal right no it's uh it's it's just very small institutions that we have a very strong relationship with interesting okay is your own money in that are you an lp in that institution are you deploying your own personal capital through through that tranche my own personal capital is also in the junior triage not to the company that's that is how you build a great company here right and get like the best of both worlds on all sides this makes total sense okay let's go back to talking about market now we understand economics i mean how do you go convince like right salesforce and all these guys to sort of adopt you what's that playbook look like yeah the playbook actually is is is is quite simple and it's all about revenue growth right i mean we're charging five percent which to some companies i mean the way we think about it is it's really two percent above what credit card fees are uh so if you're using stripe for your payables we're charging two percent incremental to to stripe on on collections and it's really all about revenue growth and the ability to cross-sell upsell and drive price increases so within our existing beta beta customer group we've seen acvs rise by about 25 and we've seen a sales cycle decline by about 15 driving just under 50 revenue growth and so the opportunity is really in in that in a nutshell is how do you upsell cross-sell drive price increases and then how do you pivot from a monthly subscription strategy and plan to really upfront contracted revenue so we also have a number of businesses who you know to get started into the market started with a monthly subscription plan because it's a little bit more amenable from the customer side and now we're getting those customers to pivot to upfront contracted pricing using our pay over time flexible financing solutions as the incentive to the end customer so how many of those end customers do you have right now how many companies you factor at least one invoice so we have just over 10. okay just over 10. and are these all b2b sas companies mainly uh b2b sas and services businesses and service okay last question here obviously vintages default rates borrowing based certificates right you've got to try and underwrite that smb and their ability to repay that 1666 per month how do you handle that so we're integrated on a number of different platforms the first integration that we use is a plot api so we do a quick kind of bank account underwriting model we underwrite them pretty quickly based off their cash balance based off their cash burn and their ability to repay we also look at a number of different alternative data sets regarding software review data investor data etc to ultimately get up to speed as quickly as possible on the borrower and make sure that that diligence process and that underwriting process is actually super streamlined so the backstage salesforce sales rep though now has to ask that smb to connect their bank account they might argue that's really high friction how do you get around that onboarding takes less than a minute um and and we can approve the invoice within an hour so it's not that type of speed it's the confidentiality it's the oh my god i have to give all my bank information to this middle party i don't know about just to do a sales force contract yeah it's a great question i think that a lot of people are are much more interested in ultimately being able to finance these transactions and be able to pay these transactions to ultimately deliver and generate an roi attached to that dollar and and people have continually continued to push and been okay with sharing some of this information to get access to the capital that they need to grow um and if you think about you know what stripe has access to what you know any of these platforms have access to i think we're a lot more amenable to sharing and that will continue that trend will continue for years to come and baxter so what do you when you put your performance together right on the fund structure right you're blind i think you said you're you're blended cost capital right including the junior trunk is on just under 10 right that's blended no so this the senior is just under 10 blended is to your point 10 to 10 to 13. okay cool so the junior's making a little bit more because there's more risks they're subordinated uh under under the main tranche um what do you think you can earn on the fund what do you think what's the projected irr so we'll be able to earn probably mid mid mid 20s um and so our our spread on our business is you know call it in the conservative manner about 10 so how do you do that people are gonna hear you charge five percent but then they're gonna go wait how does he earn 25 ir how does that work so the goal is in terms of recycling capital so each one of these transactions if you take out ninety five hundred dollars take out ten thousand dollars if you're you know you're paying just over sixteen hundred dollars for that invoice we then receive that payment and then lend that out again and so we're able to earn multiple fees on every single deal that we have outstanding um and it's the way in which a lot of these lending platforms work um and ultimately the goal is really to return that to our end borrower and the ability to decrease the cost of funds and able to pay up front for you know these large software purchases that they wouldn't be able to afford previously guys are you following along this is a very smart fintech guy knows all the numbers understand it comes from it so just to make the math very easy right if you've got a 10 million dollar facility he's got a great product going to market that makes everyone's lives easier on both sides if he can deploy 10 million bucks at a blended cost of 12 and he's able to earn 25 by recycling that capital quickly as the monthly payments come back it's effectively yield of almost 12 to 13 percent on 10 million or about a 1.2 to 1.3 million dollar run rate right baxter that that's exactly right nathan i think he may be smarter than i am no hell no but the question is right can you keep redeploying all those payments as they come back as your fund grows to 100 million and a billion you're going to be getting payments back monthly that are a million and then 10 million and like can you get them out quick enough right that's exactly right capital efficiency in any of these lending businesses and fintech models is super important and i think the you know the core of the product which is even more important is how do you drive value for your partners and customers and that's really what we're more focused on as opposed to capital efficiency in these early days is how can we create a software solution that drives value and is a win-win solution for both salesforce and their end customer we're doing it today but the goal is to keep it up keep the innovation keep the technology you know machine moving and really advance the b2b payment space which as we all know is very antiquated a couple rapid fire survey we're out of time but because i got i love this business model so i lost track of time but quick stuff here you did you you raised equity that five million you raised last year um we raised that in q3 of last year q3 last year okay cool and that was that's your i mean that was your first capital and right that's your only capital in equity sidewise yeah i i invested a little bit of money personally in the business to really get it off the ground but that was our kind of first you know call it third party institutional race okay are you the sole co-founder or sole founder yes okay we love that so he knows he's onto something big he says i'm going to risk my own capital i want to keep 100 i'm going to be very manage the cap table here so that's great now baxter was that money you initially put in did you structure it as a loan or was that real equity that was real equity i was gonna say the real extreme example was that you loan your own company that money you raise the five million you take that back you got in the junior tranche like you're on all sides of this thing which is great okay but it's your own money so four million five million raised last year pre-seed round we'll see what happens next just to be clear you haven't deployed 10 million yet so you're under a 1.2 million dollar run rate but you think you can break that fairly quickly if you deploy the capital yeah we we should be able to hit that pretty quickly i i think the you know the goal is continuing to go to market and continue to get our value prop out there um i ultimately think that you know b2b payments is a trillion dollar industry and every single b2b company whether it's software services will have flexible pricing solutions you know we can't live in a world in which pay by ach and pay by wire are the only two solutions for checking out for a ten thousand dollar payment or a two dollar payment um and there's just going to be a tremendous amount of innovation in the space and it's a really really exciting space to be in team size today how many people 13. hey how many engineers nine no okay there you go so when he says there's tech behind it there's tech behind it there's nine engineers there you go that's proof is in the pudding right very cool bachelor let's wrap up here with the famous five number one favorite book shoe dog number two is there a ceo you're following or studying frank slootman no okay that's a hell of a business uh can you do this on utility-based pricing i mean snowflake really i would argue is not sas it's actually utility-based pricing it changes every month utility-based pricing is a really really interesting model i think snowflakes perfected it just given their ability to innovate and and market position in the space for our specific business model i think you you may be able to but but it will be challenging yeah maybe that's the future who knows number three what's your favorite online tool for building alternative notion number four how many hours of sleep to get every night six to seven and what's your situation married single kids fiance getting married in august oh very exciting okay but no kids right no kids all right how are you baxter i'm 32. last question something you wish you knew when you were 20. try everything that's in front of you i think there's a there's a continued push to to really you know broaden your horizons and take advantage of all the opportunities i think especially on on the entrepreneurship side you know you really need to you know start the business you don't think you can uh and go for the stars and get that experience even if it doesn't turn into something um because you know the future is bright guys he cut his teeth at victory park and apollo launched last year in 2020 he said there's got to be a better way if you're smb and want to use salesforce and can't pay 10k up front there's got to be a better way to do it that's what he's built with alternative.co he's funded himself by raising a 5 million equity round last year in addition to 10 million of debt he's deploying that capital that debt at a you know at cost capital him about 12 to 13 and if he can lend it keep the waterfall going keep recycling that money and earn 25 the yield there is about 12 to 13 percent or about a 1.2 million runway as it continues to scale we'll see what happens 10 enterprise b2b sas companies and service companies using him to help give their customers more payment options which helps them grow their own revenue faster team of 13 today we'll see what happens next baxter thanks for taking us to the top thanks so much really appreciate nathan one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 p.m central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas founders you want to get in there we've probably talked about your tool if you're running a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at nathan lacka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode and if you enjoyed it click the thumbs up we get a lot of 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