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LIGHTER CAPITAL © COPYRIGHT 2015
How to Compare
Funding Options for Your Tech Startup
Molly OtterCIO, Lighter Capital
LIGHTER CAPITAL © COPYRIGHT 2015
Lighter Capital: Chief Investment Officer since 2013
AEA Investors LP: Previously Molly was the Vice President at AEA Investors LP. She joined AEA as part of the initial founding team of the Debt Group.
American Capital Strategy: Before AEA Investors LP, Molly was at American Capital Strategy, a private equity firm with investments vehicles which served the High Yield distress debt industries.
M.Sc. – London School of Economics
BA – Dartmouth College
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10+ years in finance and investment, working across all
segments of the capital structure
Presenter: Molly Otter
LIGHTER CAPITAL © COPYRIGHT 2015
About Lighter Capital
52%25%
21%SaaS
SaaS + Service
Tech-enabled services
Digital Media
›100+ financings across 80+ companies
›Almost 80% are SaaS
›Revenue Based Financing for tech companies
›$50k-$1mm+ funding per company
›Technology + Capital = Better for Entrepreneurs
LIGHTER CAPITAL © COPYRIGHT 2015
› The best of debt and equity – aligned interests with no dilution
› Essentially a royalty agreement until a fixed $$ amount paid
› Monthly payments = fixed % of revenue
› Fits SaaS very well
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What is Revenue-based financing?
1 2 3 4 5 6 7 8 9 10 11 12 13 14Period
Company revenueLoan payment Criteria:
› Revenue: $15k-$1m/ month
› Profitability: Not required, but clear path to profitability
› Multiple Customers
› Recurring Revenue/Customers
› High management ownership
› U.S. focus
LIGHTER CAPITAL © COPYRIGHT 2015
Today’s Agenda
The funding landscape
Your funding paths and options
Preparing for funding
Q&A
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LIGHTER CAPITAL © COPYRIGHT 2015
The Funding Landscape
Cost of Entry
Speed of Innovation
More Startups
Angels/VC
Larger Funds
Series A is The New B
Other Sources
Corporate Venture
Debt + Crowd funding
LIGHTER CAPITAL © COPYRIGHT 2015
VC Backed Non VC
Revenue$5m
Series B
Corporate Venture
Established
Ideation
Launch & Traction
Growth & Scale
Breakout
Series C
Debt
Equity
Tech Banks
Series A Revenue-Based
Financing
Blended
Series A
Series B
Tech Banks
Series C
Revenue-Based Financing
Tech Banks
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Funding Paths
Bootstrap / Friends & Family
Incubator / Angels
LIGHTER CAPITAL © COPYRIGHT 2015
Bank / Debt Revenue-Based Finance
Venture Capital
Guarantees &Controls
Financial CovenantsSometimes 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 3-9
months of focused effort
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Funding Option Comparison
LIGHTER CAPITAL © COPYRIGHT 2015
1. Equity Valuation? What % to give up for the capital?
2. Control/Partnership Who makes key decisions?
3. Value Add More than just money? Accelerate value?
4. Risk Tolerance Personal assets?
5. Timeframe/Distractions How long will raising funds take?
6. Horizon Exit strategy? Build to exit? Build and hold?
7. Culture Is there alignment?
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Selecting a Funding Path
LIGHTER CAPITAL © COPYRIGHT 2015 p10
Know Your Numbers› Actual historical › Projections & assumptions› Key SaaS metrics› Capitalization
Document Your Company› Executive summary› Investor deck › Supporting slides / deep info› Product demo
Get Ready for Funding – the Checklist
Take Action› Activate your network › Legal + accounting prep› Keep momentum / sense of
urgency
LIGHTER CAPITAL © COPYRIGHT 2015 p11
Financials› MRR (Monthly Recurring
Revenue)› Burn rate› Zero cash date
Customer Metrics › Acquisition costs: CAC, CAC
Ratio, CAC Payback › Customer value: ACV, LTV› Churn
Key SaaS Metrics
Growth › Monthly and annual revenue
growth rates› MRR/ARR growth rate
› 40% rule: is your growth outpacing your burn?
Market/White Space › Market size / disruption› Competitors
LIGHTER CAPITAL © COPYRIGHT 2015
Q&A
Visit Our Websitewww.lightercapital.com
Apply Onlinewww.lightercapital.com/apply
See If You Qualifywww.lightercapital.com/how-it-works/see-if-you-qualify
Learn More about Lighter Capital Download the Funding Options Whitepaper
bit.ly/1FBAtFs