DH Capital and SaaS Capital, both specializing in financing high-tech companies, have created a fund to provide growth capital to Software-as-a-Service (SaaS) companies just past the startup stage, DH Capital said Tuesday.

The companies will offer flexible credit facilities to cloud-based software startups, a space the investors said had been unduly underserved by capital markets.

Todd Gardner, CEO of SaaS Capital, said availability of capital for SaaS businesses has not kept pace with the market’s prospects. “Even as the business model has flourished and weathered a recession, SaaS remains undervalued and underserved,” he said.

Peter Hopper, CEO at DH Capital, said the market was underserved by the investment-banking community as well. “We are excited to partner with the SaaS Capital team to help support SaaS companies with both capital and investment banking services,” he said.

The fund is available to companies already turning over at least US$3m a year. The credit facility is scalable, meaning the total amount of available capital to a company increases as the business grows.

The lenders will determine credit availability against booked but unbilled contract value or recurring monthly revenue. Borrowing against future cash flows gives businesses the ability to “essentially self-fund their current growth activities,” DH Capital said.

The fund will issue loans ranging from $1m to $4m, but will make larger facilities available through syndication partners of necessary.

DH Capital is an investment-banking firm that serves data centers, wireless, telco, hosting and cloud sectors. It has helped bring a number of major acquisitions in the space to a close, including Internap's acquisition of Voxel, the purchase of Xand by Abry Partners, and the acquisition of SoftLayer by GI Partners and the hosting company's management-team members.