Discover a New Funding Option - Revenue Based Financing

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014

Revenue-Based Financing

Discover a New Funding Option

October 23, 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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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


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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What is it and how it works



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

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p7

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Period

Company revenueLoan payment

Payments Based on a Percent of the Company’s Revenue


› 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


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


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

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 11

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


How to decide if it's for you and how does it compare



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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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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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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› 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


A Snapshot of Funding Options by Stage

EstablishedIdeation Launch & Traction

Growth & Scale

Breakout

Bootstrap/Self

Family & Friends

Angels and Incubators


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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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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Want to Learn More?

Visit Our Websitewww.lightercapital.com

Apply Onlinewww.lightercapital.com/apply

See If You Qualifywww.lightercapital.com/how-it-works/see-if-you-qualify

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Discover a New Funding Option - Revenue Based Financing

Small Business & Entrepreneurship

Transcript of Discover a New Funding Option - Revenue Based Financing