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Revenue-Based Financing 
Why it works for growing 
technology companies 
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 
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 
p2
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
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
Revenue-Based Financing 
What is it and how it works 
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
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
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
› 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
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
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
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
Revenue-Based Financing 
How to decide if it's for you and 
how does it compare 
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
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
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
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
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
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
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
Questions? 
Apply Online for a RevenueLoan from Lighter Capital 
www.lightercapital.com/apply 
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014

More Related Content

Revenue Based Financing: Why it Works for Growing Technology Companies

  • 1. Revenue-Based Financing Why it works for growing technology companies September 16, 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