Alternative Startup

Financing Options

#alternativefinancing

About Your Hosts

2

R. Branden HarperDirector

Sirk RohChief Operating Officer

Agenda

• Fundraising game plan

• Fundraising decision points – it’s about more than just the

money!

• Fundraising profile

• Funding paths

• Funding options at different stages of the development

process

• Equity vs debt considerations

• Preparing your company for investment capital

Fundraising Game Plan

• How much money do you need to raise?

• What’s that money going to be used for?

• At what cost and with what terms and conditions?

• What type of capital is the best fit for your company, and why?

• Where do you find the type of financing you need?

• Milestone financing

Fundraising Decision Points

• 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?

Your Company’s Fundraising Profile

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?

o Product-Market fit?

o Revenue / pricing model?

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

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

TeamWell-rounded and committed team able to handle increased complexities? Need for key hires?

Funding Paths Around Milestones

Ideation ($0M)Bootstrap / Self Credit Family & Friends

Launch and Traction ($0-1M)

• Operating: customer and vendor terms• Crowdfunding• Incubators• Revenue-based financing• Angels

Growth and Scale ($1-5M)

• Operating: customer and vendor terms

• Crowdfunding• Revenue-based

financing• Angels

+• Strategic

investors• Banks

Breakout and Beyond ($5M+++)

Equity / Debt Considerations

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

Revenue-Based Financing

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

Pri

ncip

al

Loan Maturity

1.5x

to

2.5xPrincipal

Fundraising Prep

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

Q&A and Thank You!

15

R. Brandon Harper

www.lightercapital.com

@lightercapital

Sirk Roh

www.earlygrowthfinancialservices.com

contact@earlygrowthfinancialservices.com

415.234.3437

@EarlyGrowthFS