lighter capital webinar © copyright 2014 why it works for growing technology companies...
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Why it works for growing technology companies
Revenue-Based Financing
September 16, 2014
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
About Lighter Capital
› Lends $50K-$1M in growth capital
› Entrepreneur-friendly structure we call a RevenueLoan (revenue-based finance)
› Goal: make funding fast and easy. Tech-enabled analysis, diligence, underwriting and servicing.
› Currently 3-4 deals / month
› Completed >50 deals: Most active revenue-based finance lender in the country
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
About BJ Lackland
Lighter Capital, CEO since 2012
Power Efficiency Corporation, CFO & DirectorPublic energy technology company, raised $20M in equity financing, $5M in various debt financings
Summit Energy Ventures, VP & Director (Partner)$25M venture capital fund focused on Series A & B rounds, PIPEs, convertible debt
Other, Active angel investor and consultant to early stage companies. Senior finance and marketing leader at tech startups, EnCompass Globalization and webStrategic.
MBA and MA in International Studies from University of Washington
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BJ LacklandCEO,
Lighter Capital
15 years financing early stage tech companies,
either as an entrepreneur or investor.
Over $50M raised or invested
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Today’s Agenda
What is revenue based financing
Who it's designed for
How it compares to other funding options: banks, angels, and VCs
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
How RevenueLoan Works
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Up to $1M or up to 33% of annualized revenue run rate› No set interest rate, payment, or maturity › Monthly payments are a fixed percent of revenue› Matures in 5 years or when cumulative payments equal a set
amount, usually 1.5 – 2.5x principal› Small upside participation
Example Loan
› Annual Revenues: $1M
› Principal: $200K
› Maturity: 5 years
› Payment: 5% of monthly revenue
› Repayment: 1.75x principal ($350K)
› Upside Participation: $50K at liquidity event
Cum
ula
tive
Pa
ymen
ts
Prin
cip
al
Loan Maturity
1.5xto
2.5xPrincipal
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Period
Company revenueLoan payment
Payments Based on a Percent of the Company’s Revenue
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
› No financial covenants – Payments depend only on company performance.
› No loss of control – No board seat, no ability to replace management.
› No personal guarantees – Secured only against the assets of the company.
› Aligned interest – Our IRR depends on your performance.
› Advice – We’re here to help however we can. “VC-Light”.
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The Best of Equity and Debt
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Early growth stage technology companies
Lighter Capital’s Investment Criteria
Financials:
› Revenue Min: $15k+ / month
› Gross Margin: High (50%+)
› Profitability: Not required, but clear path to profitability from our funds
› Other Debt: Not too high (unless convertible debt)
› Customer Base: No major concentration
› Recurring Revenue or Repeat Customers
Management:
› High ownership, full time dedication
Geography:
› HQ in US or Canada
Use of Funds:
› Growth: Sales, marketing, product
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Software, SaaS, digital media, tech services and similar
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Fast Process- Get Funded in a Month!
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Result: We fund 18% of companies that meet our criteria
Company snapshot
Create a high level company overview online
in 10 minutes.
Getting the details
We will send you a link to upload and provide financial
statements, customer and team information followed by
one or two calls with our underwriting team.
Closing the deal
We issue a Term Sheet for review. Once agreed,
you are funded
STEP 1 STEP 2 STEP 3
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Client Case Study- Cloudbilt and Valant
› A SaaS company on the Saleforce platform
› Bootstrap- the only outside money raised
› 4 rounds of funding, totaling $1M
› Recently named #227 on Inc. 500 fastest growing private companies, and #15 in the software industry
› Grew 1,995% between 2010-2013
› A SaaS solution for mental health professionals
› Used $250K for product development, sales & marketing
› Recently raised a $11M equity round
› Monthly revenue grew >10X
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
How to decide if it's for you and how does it compare
Revenue-Based Financing
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
World of Funding: Competition is Intense
Source: US Census Bureau, Crunchbase, CB Insights
~6 Million US Business
90% of whom have 20 or fewer employees
127,100 small software companies
2,283 Angel and Seed InvestmentsSeed / Angel = 1.8% of small software companies per year
1,009 Series A InvestmentsSeries A = 0.8% of small software companies per year
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
What Will You Be When You Grow Up?
› Different ‘financing roadmaps’ available, depending on the business
› Know your business
› Know your goals
› Choose wisely
› Choose a financing path that’s available. Dead ends waste time
› Financing financing decisions are hard to reverse
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Know Your Business
Stage & Capital› What is the current company stage? What is the next stage?› How much capital do you need to get to the next stage?› Existing investors needs?
Sales & Marketing› Nailed the target customer? › How big is your target market? Larger than $1B? › Ready for scale?
› Product-Market fit? Nailed customer acquisition cost, LTV, churn?› Nailed revenue / pricing model? › What does your sales pipeline look like? How long is sales cycle?
Team› Is your team capable of going to the next stage?
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
› Long term – Do you want to exit? When? Never?
› Control – Who do you want as partners? Who controls big decisions? How is shared control structured?
› Equity – What are you willing to give up?
› Timeframe – How long will raising funds take? Distraction?
› Risk – What are you willing to risk? Will own money? Personal assets?
› Flexibility – How do you want to repay the money?
› Mentoring – Do you want lots or little guidance?
› Aligned interest – Can you align investors’ goals with yours?
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Know Your Goals
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
A Snapshot of Funding Options by Stage
EstablishedIdeation Launch & Traction
Growth & Scale
Breakout
Bootstrap/Self
Family & Friends
Angels and Incubators
Revenue-Based Financing
VC (less pre-product/revenue than in the past, more at later stages)
Banks (w/o VC or PG)
Strategic Investors
Note: These are tendencies, NOT hard and fast rules. Many financings happen outside these bands!
$MMs$0 $0-$1M $1M-$5M $5M+
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Summary: How Do They Compare?
Bank / DebtRevenue-Based
FinanceVenture Capital
Guarantees &Controls
Financial CovenantsSometimes Personal
Guarantees
No Financial CovenantsNo Personal Guarantees
Partner in the Business (Board Seat, voting
shareholder)
Added Value Low / None Medium High
Dilution None / LowLow: Small Upside
Participation High
Payment Flexibility
Low: Fixed Payments
Medium: Variable Payments
High: No Payments
Speed 4-8 months 4 weeksHighly variable. Typical
3-6 months focused effort
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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Questions?
Apply Online for a RevenueLoan from Lighter Capitalwww.lightercapital.com/apply