I'm not an accountant, but this may not be accounting debt. It may sound like debt to you, but selling accounts receivable is a one-time transaction that sells off assets. Your balance sheet no longer includes those assets (in this case subscription payments). Taking on debt means that debt is on your balance sheet. Investors hate debt (they don't want to give you money to pay someone else back), so if you're trying to raise money, it's better to have a smaller balance sheet than a balance sheet full of debt.
I think what the parent is saying here is that while it might not "technically" be debt and might not "technically" qualify as a discount, both are still occuring from any practical perspective.
It smells like debt, it tastes like debt, it feels like debt, but its technically not debt by an accounting definition. But if it smells like it, feels like it, tastes like it, then isn't it really just debt?
Specifically in terms of the "discount", I actually think the discount is extremely fair here. Essentially "the bank" (pipe.com in this case) is taking a 6% discount on an annual contract based on extrapolated monthly or quarterly payments from a client. Yes 6% seems significant. But how often do most startups already offer 10-20% discounts for annual contracts already? How often have you seen $99 a month or $999 per year as an option when signing up for a service? That's a 20% discount. But in Pipe's case, they extrapolate $99 a month out to $1,188 and then take a 6% rake off of that, leaving the startup with $1,116.72. That's actually better than the $999 the company would get from collecting the annual contract directly. So in some way I could argue that there really is no discount here, just "fees".
I think that is what the parent comment is trying to get across and I think it is valid. With all that being said, I still think the service fills a vital role and is valuable for an early stage startup. If you are bootstrapping a SaaS for example, you could benefit from launching and your first 100 users essentially pay you annually. In the example above (a service that sells at $99 /mo), you would get $111,672 the first month to fund your project. For a solo founder that would be incredible. Now let's say they average 30 new users each month after that's $33,501.60 per month. You could easily build a solid business without taking on angel or seed investments (which usually come at costly equity exchanges). Even if the company still took on VC funds 18 months down the road in a series A, they would be doing it at a far better valuation which leaves more on the table for the founders and employees.
At some point you would want to transition off of this model. But you could wait until your monthly revenues fully cover your expenses. This is a critical threshold that companies often struggle to get to because it usually takes a minimum of a year to get to that level of growth, sometimes much longer. This is why VC exists. Even if you already had VC funding this model will extend your burn chart allowing you to take less VC money because all your VC funds are going towards accelerating growth instead of maintaining the business.
This topic came up in Matt Levine’s column a day or two ago[1]. There are supply chain financing companies that let a big business pay suppliers after eg 90 days while the intermidiary pays those companies earlier (at a discount). The theory was that it makes the companies accounts look more appealing (having a lot of accounts payable supposedly implies you’re efficiently using cash by not paying suppliers until later).
