Published on October 23, 2014
1. Discover a New Funding Option Revenue-Based Financing October 23, 2014 LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
2. 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 LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p2
3. About BJ Lackland LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 Lighter Capital, CEO since 2012 Power Efficiency Corporation, CFO & Director Public 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 p3 BJ Lackland CEO, Lighter Capital 15 years financing early stage tech companies, either as an entrepreneur or investor. Over $50M raised or invested
4. Today’s Agenda What is revenue based financing Who it's designed for How it compares to other funding options: banks, angels, and VCs LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p4
5. Revenue-Based Financing What is it and how it works LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
6. How RevenueLoanWorks LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p6 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 Cumulative Payments Principal Loan Maturity 1.5x to 2.5x Principal
7. Payments Based on a Percent of the Company’s Revenue Company revenue Loan payment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Period LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p7
8. › 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”. LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p8 The Best of Equity and Debt
9. Lighter Capital’s Investment Criteria Early growth stage technology companies 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 LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 Management: › High ownership, full time dedication Geography: › HQ in US or Canada Use of Funds: › Growth: Sales, marketing, product p9 Software, SaaS, digital media, tech services and similar
10. Fast Process- Get Funded in a Month! STEP 1 STEP 2 STEP 3 Company snapshot Create a high level company overview online in 10 minutes. LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p10 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 Result: We fund 18% of companies that meet our criteria
11. Client Case Study- Cloudbilt and Valant LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 11 › 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
12. Revenue-Based Financing How to decide if it's for you and how does it compare LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
13. World of Funding: Competition is Intense Source: US Census Bureau, Crunchbase, CB Insights LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 ~6 Million US Business 90% of whom have 20 or fewer employees 127,100 small software companies 2,283 Angel and Seed Investments Seed / Angel = 1.8% of small software companies per year 1,009 Series A Investments Series A = 0.8% of small software companies per year p13
14. What Will You Be When You Grow Up? LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 › 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 p14
15. 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? LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p15
16. Know Your Goals › 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? p16 LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
17. A Snapshot of Funding Options by Stage Strategic Investors Ideation Launch & Established Traction $0 $0-$1M $1M-$5M $5M+ $MMs LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 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) Note: These are tendencies, NOT hard and fast rules. Many financings happen outside these bands! p17
18. Summary: How Do They Compare? Bank / Debt LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 Revenue-Based Finance Venture Capital Guarantees & Controls Financial Covenants Sometimes Personal Guarantees No Financial Covenants No Personal Guarantees Partner in the Business (Board Seat, voting shareholder) Added Value Low / None Medium High Dilution None / Low Low: Small Upside Participation High Payment Flexibility Low: Fixed Payments Medium: Variable Payments High: No Payments Speed 4-8 months 4 weeks Highly variable. Typical 3-6 months focused effort p18
19. Questions? Apply Online for a RevenueLoan from Lighter Capital www.lightercapital.com/apply LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
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