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How to Compare

Funding Options for Your Tech Startup

Molly OtterCIO, Lighter Capital

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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

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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

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› 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

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Today’s Agenda

The funding landscape

Your funding paths and options

Preparing for funding

Q&A

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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

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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

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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

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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

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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

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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

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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

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