Stockholm-based Float, which extends financing to European tech firms, finds AI-driven companies particularly tricky to evaluate despite their rapid revenue spikes. Co-founder and COO Jannis Koehn warns that many such businesses experience sudden customer attrition after initial growth, prompting him to approach AI lending with heightened caution. While he remains optimistic about traditional SaaS firms leveraging AI for product enhancements, Float prioritizes sustained customer payments over short-term hype.
Koehn is more optimistic about established SaaS businesses using AI to improve their products. For a lender, the test is whether customers keep paying once the excitement and initial launch of a new product fades. Float works with credit funds and banks, and its main funder is a U.K. credit fund. The company is in discussions about adding a second facility, most likely with a European bank.
Assessing Credit Risk
When a company comes to Float for funding, Koehn decides whether the financing makes sense for them or whether they should raise equity or go to a bank. He considers the balance between growth and cash burn, as most of Float’s customers are burning cash. The company looks for a moderate burn relative to the company’s growth.
Koehn has spoken with thousands of tech companies, mostly SaaS businesses, and has funded more than 150 companies, deploying over €100 million across 17 European countries. Float’s sweet spot is usually a company with around €1 million to €20 million in annual recurring revenue. Koehn believes that the key to successful lending is understanding the business and its growth potential.
One pattern Koehn has seen recently is revenue shooting up quickly at some companies, often AI companies, only to be followed by a sharp rise in churn six or 12 months later. This makes him cautious about lending to AI companies, as it is difficult to assess their long-term growth potential. Float has funded one or two AI companies early on but has since become more cautious.
Koehn believes that SaaS companies are well-positioned to benefit from AI, as it can make them more competitive by reducing development costs or increasing developer productivity.
The rise of AI has not changed how Koehn views the SaaS companies Float funds. He wrote a memo saying that the narrative that SaaS is dead and AI will replace it is “largely nonsense.” Instead, Koehn believes that AI can enhance SaaS companies’ existing business models.
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Transparent Financing
Float aims to offer financing that is simple, flexible, and transparent. The company provides a credit facility that allows customers to draw as much or as little as they need, whenever they need it. The pricing is pay-as-you-go, with one charge on the money the customer actually draws. There are no structuring, setup, or legal fees, and no availability fee, commitment charge, or exit fee.
Koehn believes that the scarcest resource a startup has is its founder, and the founder’s scarcest resource is energy. Float wants the financing process to save founders both time and energy. The company’s loan agreement is about six or seven pages long, compared to the 20, 30, or 40 pages of a traditional loan agreement.
Koehn had lunch with a Spanish customer who was visiting Stockholm and told him that he likes the freedom Float’s product gives him: He can grow on his own terms without adding anyone to his cap table. Koehn thinks that this is a key benefit of Float’s financing model, as it allows founders to maintain control of their companies while still accessing the capital they need to grow.
As a founder and CFO, Koehn has learned the most about running finance. He has to manage liquidity, report to investors, and understand whether the business is doing well and whether it’s profitable. On top of that, he has to structure financing facilities and manage the capital behind the loans Float makes.
Koehn believes that large companies are starting to give CFOs formal operational responsibilities because it reduces silos that can work against each other. He thinks that it’s valuable for finance people to have real operational experience and incentives tied to how the business performs.
Float tries to put this into practice by having salespeople and underwriters work together to make lending decisions. Koehn doesn’t want salespeople pushing for more loans while underwriters push for fewer. Instead, he wants to create a team that works together to make informed decisions about which companies to lend to.
Float’s approach to lending is based on a deep understanding of the companies it funds. Koehn and his team look for companies with strong growth potential and a moderate cash burn. They believe that AI can enhance SaaS companies’ existing business models, and they are cautious about lending to AI companies with unproven growth potential. The company’s financing model is designed to be simple, flexible, and transparent, with a focus on saving founders time and energy.
