Compare Funding Options for Your Startup

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Funding Options

for Growing Technology

Companies

An Insider’s Guide


› Mission: make fundraising

process more efficient utilizing

technology and alternative

structures

› Funded +60 tech companies:

Most active revenue-based

finance lender in the country

› $50K-$1M in growth capital

› Entrepreneur-aligned structure

About Lighter Capital


Lighter Capital: Director since 2014

Investment Banking: Senior Partner at GT

Securities; Focus on emerging technology companies

capital raising and M&A; raised +$50m in combined

equity/debt transactions

Startup: Business Development, Finance + Client

Management roles at various venture and angel-

backed digital media, mobile and music technology

companies

Other: Angel investor in various music technology

companies

MBA - University of Washington

BA – University of Texas

p3

+10 years financing early

stage tech companies, either

as an entrepreneur or investor.

Over $50M raised or invested

Presenter : R. Branden Harper


Macro: Trends + Paths + Tradeoffs

Micro: Company Profile + Goals

Fundraising Tips

Lighter Capital’s Solution

p4

Agenda


Macro: Trends in Funding Landscape

Cost of Entry

Speed of Innovation

More Startups

Angel/VC

Larger Funds

Larger Checks

Series A is New B

Additional Sources of

Capital

Corporate Venture

Debt +

Crowdfunding

p5


VC Backed Non VC

Revenue$

5m

Series B

Corporate Venture

Established

Ideation

Launch &

Traction

Growth &

Scale

Breakout

Angels / Incubators

/Crowdfunding

Series C

Debt

Equity

Tech Banks

Series A

Bootstrap / Friends &

Family

Revenue-Based

Financing

Blended

Series A

Series B

Traditional Banks

Tech Banks

Series C

Macro: Funding Paths

Angels / Incubators

/Crowdfunding

Angels / Incubators

/Crowdfunding


Family


Family

Revenue-Based

Financing

Tech Banks

p6


Bank / DebtRevenue-Based

Finance

Venture

Capital

Guarantees &

Controls

Financial Covenants

Sometimes Personal

Guarantees

No Financial Covenants

No Personal Guarantees

Partner in the Business

(Board Seat, Voting

Rights)

Added Value Low / None Medium High

Dilution None / Low None 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

p7

Macro: Equity / Debt Considerations


Stage, Traction & Capital Requirement› What is the current company stage? Rate of growth?

› How big is your addressable market? Higher/lower than $1B?

› Ready for scale?

• Product-Market fit?

• Revenue / pricing model?

• What does your sales pipeline look like? How long are sales cycle?

› How much capital do you need to get to the next stage?

Team› Well-rounded and committed team able to handle increased

complexities? Need for key hires?

p8

Micro: Your Company’s Fundraising Profile


› Equity Valuation? What % is worth taking on investment?

› Control Are you the driver? Who makes key decisions?

› Value-add More than just money?

› Risk Tolerance Personal assets?

› Timeframe How long will raising funds take?

› Horizon Exit strategy? Build to exit? Build and hold?

› Culture Is there alignment?

p9

Micro: Your Company’s Fundraising Goals

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p10

Know Your Numbers

› Historical/Projections

› Ability to defend your assumptions: growth, capital requirements

› Pivots, capitalization, customers

Document Your Company

› One-page/Executive Summary/Deck/Product Demo

Activate Your Network

Legal + Accounting

Customer, Vendor, Partner References

Keep Momentum

› Follow up, set target dates to funding, sense of urgency

Fundraising Tips


Up to $1M or 33% of annualized revenue run rate

› No set interest rate

› Matures in 5 years or when cumulative payments equal a set

amount, usually 1.5 – 2.5x principal

› Monthly payments are a fixed percent of revenue, 2-8% range

› Small cash 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 Cu

mu

lative

Pa

ym

en

ts

Prin

cip

al

Loan Maturity

1.5x

to

2.5xPrincipal

Revenue-based Financing


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

Management:

› High ownership, full time dedication

Geography:

› HQ in US or Canada

Use of Funds:

› Growth: Sales, marketing, product

p12

Software, SaaS, Digital Media, Tech Services and similar

Lighter Capital’s Investment Criteria


Result: We fund +27% of companies that meet our criteria

Company

snapshotCreate a high level

company overview online

in 10 minutes.

Getting

the detailsWe 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 dealWe issue a Term Sheet

for review. Once agreed,

you are funded

STEP 1 STEP 2 STEP 3

Lighter Capital’s Funding Process

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 14

› SaaS company on Salesforce platform

› 4 rounds of funding, totaling $1M

› No prior outside capital

› Grew 1,995% between 2010-2013

› Recently named #227 on Inc. 500 fastest

growing private companies, and #15 in the

software industry

› SaaS solution for mental health

professionals

› Used $250K for product development,

sales & marketing

› Monthly revenue grew >10X

› Recently raised a $11M equity round

Example Portfolio Companies


Want to Learn More?

Visit Our Website

www.lightercapital.com

Apply Online

www.lightercapital.com/apply

See If You Qualify

www.lightercapital.com/how-it-works/see-if-you-qualify

http://www.lightercapital.com/?cmpid=701i00000007uio&mch=Social&mchd=SlideShare

https://secure.lightercapital.com/M1/Apply.aspx?cmpid=701i00000007uio&mch=Social&mchd=SlideShare

http://www.lightercapital.com/how-it-works/see-if-you-qualify/?cmpid=701i00000007uio&mch=Social&mchd=SlideShare

Compare Funding Options for Your Startup

Small Business & Entrepreneurship

Transcript of Compare Funding Options for Your Startup