Two Ways To Skip A VC Round With Alternative Funding Presented by Lighter Capital & Boast Capital

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About Lighter Capital

52%  25%  

21%  SaaS  

SaaS  +  Service  

Tech-­‐enabled  services  

Digital  Media  

›  230+ financings across 160+ companies

›  Almost 80% are SaaS

›  $120mm fund – very active!

›  Revenue Based Financing for tech companies

›  $50k-$2mm+ funding per company

›  Technology + Capital = Better for Entrepreneurs

The Market Problem

Banks Highly risk averse. Not growth capital. Focused on profitable firms with hard assets. $300B in SBA Loans $280B in SMB unmet need VC/Angel

Unicorn hunters 1% of Startups raise VC ~$8B invested in ~4,000 early stage deals / year

How can we get capital to

grow our businesses?

“Fewer than 1% of startups raise venture capital.”

IPO

Friends/Family

VC Series-C

Incubators/Angels

$0 $200K $12M

VC Series-A

Banks

$100M

Bootstrappers

VC Series-B

VC Series-D

We help bootstrappers stop using personal resources without dilution. We also help startups raise VC funding at much higher

valuations later, by improving their metrics in the near-term.

Sample company growth journey

SOLUTION

Revenue-Based Financing

Alignment: The faster the company grows, the higher

Lighter Capital’s IRR

Blend between bank debt and venture capital

No equity dilution. No personal guarantees

•  Structured like a royalty

agreement •  Capital provided in return for a

fixed percentage of revenues

•  Repaid monthly until a multiple of the loan amount has been paid

Long-term growth capital with the best features of debt and equity

No equity dilution or warrants

No personal guarantees

Follow-on funding = APPROVED!

Initial Funding 2-4 weeks (follow on 1 week)

Flexible payback options

BENEFITS

No equity dilution/board seat No personal guarantees

Get funded in 2-4 weeks Flexible payback options

SOLUTION

We typically fund companies that:

•  Have $15K - $1M/month in revenue •  6 months of revenue history •  Have recurring customers (SaaS) •  Are U.S.-based or U.S.-focused •  Are on a path to breakeven/

profitability •  Use of funds for growth

ELIGIBILITY

VC Later Hack����������� ������������������  the����������� ������������������  VC����������� ������������������  game����������� ������������������  

•  Came to Lighter with a terrible term sheet

•  Instead, took $1.2M of our funds over 36-months to greatly improve business metrics

•  Then raised a $7.2M Series-A at 11X better terms – a 1,000% increase in founder wealth

•  Maintained control of his destiny

CASE #1

VC Never Grow����������� ������������������  without����������� ������������������  dilution����������� ������������������  

•  100% bootstrapped business

•  Used $200K+ of our funds over 36-months to greatly improve business

•  Today, company has millions in revenue, founder owns nearly 100%

CASE #2

NOT JUST FUNDING: We have a thriving community of 157+ SaaS co-founders, 96+ VPs of sales and marketing, and 129+

additional mentors, who regularly share wisdom and help each other grow.

FOUNDER DINNERS

BI-WEEKLY PEER-ADVISOR CALLS

PRIVATE RESOURCES

RECRUITING HELP

EXPERT ADVICE

COMMUNITY

CONTACT

Lightercapital.com

BJ Lackland – CEO blackland@LighterCapital.com

Everything You Need to Know About R&D Tax Credits Presented by Lloyed Lobo

boast.ai

Agenda

– Overview of the R&D Tax Program – Benefits – Qualification Criteria – Case Study –  IRS Requirements – Do’s and Don’ts – Q&A

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What Is R&D Tax Credit?

– General business tax credit for businesses that incur R&D costs in the US

– Established in 1981, made permanent in 2015

– Credit can be claimed on all open tax years (typically 3)

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How Can I Use It?

– Carry back to the previous year

– Current tax year or carry forward 20 years

– Payroll taxes up to $250k / year

– Alternative Minimum Tax

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But I’m Not Profitable

Offset payroll taxes up to $250k / year if you:

– Have revenues for 5 years or less

– Have $5m or less in revenue for the tax year

– Are not a tax exempt organization under 501 Additional credits can be carried forward.

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But I’m Not Profitable...

Offset AMT if you have less than $50 million in average revenue for 3 preceding years. Find out what your AMT is.

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Applicable Industries

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What Can I Claim?

– US employee salaries

– US subcontractors costs

– Materials consumed in R&D

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How Much Can I Recover?

Federal –  6% of eligible expenditures or –  14% of half of the average R&D expenditures over

the past three years. If expenditures remain constant over a three year period, this method results in a 10% credit

State

–  Differs from state to state –  California is 15% of eligible expenditures,

calculated as 15% of half of the average R&D expenditures over the past three years

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How Do I Qualify?

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How Do I Qualify?

5 questions to determine if you qualify: 1.  Was there a scientific or a technological

uncertainty that could not be removed by standard practice/engineering?

2.  Did the effort involve formulating a hypothesis specifically aimed at reducing or eliminating the uncertainty?

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How Do I Qualify?

3.  Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypothesis?

4.  Did the process result in a scientific or technological advancement?

5.  Was a record of the hypothesis tested and results kept as the work progressed?

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Case Study

– Software startup with operations in California

– 7 developers (1 front-end, 6 back-end)

– Salaries are $150K per year and ~80% of time is eligible

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Case Study

– Front end development typically not eligible

– Eligible expenditure pool for salaries would be ~$840k

– Federal portion → ~$50k, California portion → $63k

– Total R&D tax credits received are $113k. Could be ~$122k+ if 3 years of consistent R&D spend

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When To Claim?

–  Must be specified, elected, and filed on the original 2016 tax return before you can begin to offset payroll taxes in 2017

–  March 15: S-Corps with Dec YE. Others need to claim by the 15th day of the 3rd month following the end of the tax year

–  April 15: C-Corps with Dec YE. Others need to claim within 3.5 months following the end of the tax year

–  You can request a 6 month extension boast.ai 29

Technical Documentation

– Documented at the time the work was completed

– Highlight technical challenges

– Dated

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Technical Documentation

Document technical challenges/obstacles as the work progresses:

–  Capture the problem and the iterations undertaken to attempt to resolve the problem

–  What are the different hypotheses and how was

each hypothesis tested?

–  For a typical software project, only the major technical challenges/obstacles encountered by the team in a month need to be documented – not every little problem.

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Time Tracking –  Track time by project and

activity

–  Track all activities, including non-R&D

–  Any type of system can be used (or excel if you don’t have one)

–  Time sheets can be entered daily or weekly and at half or quarter day intervals

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IRS Review

R&D Tax Review ≠ Tax Audit Multiple types of Reviews:

– Technical – Financial – Technical & Financial

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Do’s

– Pay yourself and staff

– Document activities and track times

–  Incorporate your company

– Verify PEO arrangement boast.ai 34

Don’ts

– Underestimate the importance of documentation

– Focus on the business opportunity

– Leave R&D claims until the last minute

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Q&A Lloyed Lobo 650-452-5009 llobo@boastcapital.com

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