Preparing Your Company for Investment Capital

LIGHTER CAPITAL LIGHTERCAPITAL.COM

Getting Your Ducks in a Row

Preparing Your Company for Investment Capital

David Ehrenberg Rob BelcherFounder and CEO Vice PresidentEarly Growth Financial Services Lighter Capital


Who We Are: Lighter Capital

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Based in Seattle, WA› Serial entrepreneurs, technologists, angels and ex-VCs

Tech-enabled specialty finance company› Direct business lender› Not a bank, not a VC

Employs an innovative revenue-based finance model Uses technology to speed up and simplify loan

underwriting and servicing processes


Who We Are: Early Growth Financial Services

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Outsourced financial services firm providing finance, accounting, valuation, and tax support to early-stage companies

Three different platforms of services and support Services include: transactional accounting, strategic

financial guidance, CFO services, 409a valuations, taxes, corporate governance, and compliance

Extensive experience working with companies at all stages of development

180+ successfully funded clients throughout CA, NYC, Boston, and Seattle


Webinar Agenda

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Reflection: Analyzing the Business

Projection: Business / Fundraising Game Plan

Preparation: Pulling It All Together

Documentation: Required Documents and Information

Q&A


Reflection: Analyzing the BusinessEssential questions for analyzing your business model and economics

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Projection: Business / Fundraising Game PlanWhen you’re ready to raise funds, clarity is key

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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


Funding Options and the Business Lifecycle

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Established

Ideation Launch & Traction

Growth & Scale

Breakout

Bootstrap/Self

Family & Friends

Angels

Operating : Customer and Vendor Terms

Revenue-Based Financing

VC (few seed funds, much more money at later stages)

Banks

Strategic Investors

Note: These are tendencies, NOT hard and fast rules. Many financings happen outside these bands!

Crowdfunding

$MMs$0 $0-$1M $1M-$5M $5M+


How Do the Options Compare?

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Bank / Debt Revenue-Based Finance

Venture Capital

Guarantees &Controls

Financial CovenantsPersonal Guarantees

Limited Financial CovenantsNo Personal Guarantees

Board SeatProtective ProvisionsDrag-along

Added Value None Introductions & PR Introductions & Mentoring

DilutionNoneWarrants

Small Success Fee Moderate to Extreme

FlexibilityInflexibleFixed Payments

Highly FlexibleVariable Payments

Highly FlexibleNo Payments

Speed 4-8 months 2 weeks 3-6 months


How Does it Work?

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Company revenueLoan payment

Loan payments are based on a percent of the company’s revenue.


Preparation: Pulling It All TogetherWhat you need to impress potential investors

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Executive summary Financial model / budget Product demo Pitch deck


Key Slides in Your Pitch DeckInclude elements that are most relevant for your company

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Who are you? Venture concept / problem to be

solved Market opportunity Market strategy Competitive advantages and risks Technology Manufacturing/Production Management team Financials Funding requirements


Business Plan

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Current business plan Financial projections


The Fundraising ProcessHow to tackle fundraising as a business development exercise

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Business development process Determine your funding round Build your value proposition Identify the right investors given

your stage, size, industry, and focus

Target key players Rely on your ecosystem

Recommended reading: Art of Start, Insider's Guide to Silicon Valley, Early Exit


Documentation: Required DocumentsNecessary documentation and information for due diligence

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Corporate Records and Charter Documents

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Certificate of Incorporation Articles of Incorporation (and

amendments) Certificates of Designations,

Rights, etc. Bylaws Minutes of directors' and

shareholders' meetings Written consents of directors and

shareholders


Security Issuances

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Company shareholders and option holders (showing vesting & security exemptions)

Outstanding options, warrants, rights Registration rights for company's

securities All voting trust instruments, buy-sell

agreements, voting proxies or other shareholder agreements

All permits and filings regarding securities issued by company


Material Agreements

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Obligations / payments in excess of $10,000

Personal property leases Company liabilities Property / asset related

documents Loan or advance documents Employment agreements Insurance policies Employee benefit plans Any judgment by which company

is bound Form of Proprietary Information

and Invention Agreements


Intellectual Property

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Foreign and domestic patents and patent applications Trademarks, trade names, service marks, domain names or copyrights Proprietary processes Licensing agreements (to and from)Third-party correspondence regarding potential infringement of IP rights


Disputes and Litigation

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Pending action, suit, proceeding, investigationAllegations of company's infringement of proprietary rights of othersLabor agreements or actions


Other Essential Documentation

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Securities or ownership interests in other companies

Certificates of qualification from all states or foreign countries in which company is qualified to do business

All licenses, permits or government authorization

Company’s bank accounts, lines of credit, etc.

Current or past officers, directors, or key employees who own direct beneficial interest in any competitor

Powers of attorney executed by company


Q&A and Next Steps

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@lightercapital

@EarlyGrowthFS

›Learn More:› www.lightercapital.com

› www.earlygrowthfinancialservices.com

›Apply / Contact:› secure.lightercapital.com

› earlygrowthfinancialservices.com/contact-us/

›Questions:› [email protected]

› [email protected]

Economy & Finance

Preparing Your Company for Investment Capital