Funding Options for Salesforce Partners

EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014

Which funding option is right for your business?

Financing options for Salesforce Partners

June 5, 2014


Emergence Capital PartnersLeading early stage Silicon Valley VC in SaaS and cloud-based services

› 100% focused on cloud software for business users, including software-as-a-service “SaaS,” mobile and information services.

› $575 million under management across 3 funds

Building market leaders

Our first investment. (market cap today: $32 billion)

SuccessFactors- IPO in 2007, acquired by SAP for $3.4 billion

Yammer – acquired by Microsoft for $1.2 billion

EchoSign – purchased by Adobe

Veeva – IPO (VEEV) in October 2013 (market cap today: $3 billion)

And Box, Lithium, InsideView, Hightail, Intacct, ServiceMax, Doximity, Insightly, SteelBrick and many more.

p2


Sean JacobsohnVenture Partner at Emergence Capital Partners

Cornerstone OnDemand (VP Channel Management)Joined at $7M revenue, now $300M revenue & $2B public company

WageWorks (VP Sales & Partner Development)Joined at $3M revenue, now $250M revenue & $1.5B public company

Elance (merged with oDesk)Joined at $0 revenue, now $100M revenue

Hightail (VP Worldwide Alliances)Emergence Capital portfolio company formerly known as YouSendIt

Emergence Joined as Venture PartnerSourcing business cloud startups for $250M fund. Works closely with portfolio companies Navera, Intacct, InsideView

15 years in business cloud

Sean JacobsohnVenture Partner,

Emergence Capital Partners

p3


Lighter Capital

› Lends $50K-$1M in growth capital

› Entrepreneur-friendly structure called a “RevenueLoan™” – revenue-based finance

› Tech-enabled analysis, diligence, underwriting and servicing. Goal: make funding fast and easy.

› Currently funding 3-4 total companies per month, including 1 Salesforce Partner per month

p4

Examples of Salesforce Partners funded


BJ LacklandCEO at Lighter Capital

BJ LacklandCEO,

Lighter Capital

Lighter Capital CEO in 2012

Power Efficiency Corporation CFO & DirectorSmall public energy efficiency technology company, raised $20M in equity financing, $5M in various debt financings

Summit Energy Ventures VP & Director (Partner)$25M venture capital fund focused on Series A & B rounds, PIPEs, convertible debt

Other Active angel investor and consultant to erarly stage companies. Senior finance and marketing leader at tech startups, EnCompass Globalization and webStrategic.

p5

15 years financing early stage tech companies,

either as an entrepreneur or investor.

Over $50M raised or invested


Today’s agenda: Funding options for various “startup” stages of the business lifecycle

Funding options for Salesforce Partners

More on Venture Capital – Sean Jacobsohn

More on RevenueLoans– BJ Lackland

Q&A

p6


Funding Options



Number of Financings

Source: US Census Bureau, Crunchbase, CB Insights

~6 Million US Business

90% of whom have 20 or fewer employees

127,100 small software companies

2,283 Angel and Seed InvestmentsSeed / Angel = 1.8% of small software companies per year

1,009 Series A InvestmentsSeries A = 0.8% of small software companies per year

p8


A snapshot of funding options by stage

EstablishedIdeation Launch & Traction

Growth & Scale

Breakout

Bootstrap/Self

Family & Friends

Angels and Incubators

Revenue-Based Financing

VC (less pre-product/revenue than in the past, more at later stages)

Banks (w/o VC investor)

Strategic Investors

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

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

p9


Different companies require different ‘financing roadmaps’

What type of business are you building?

› Long term goals, strategy and business model drive financing decisions

› Different ‘financing roadmaps’ available, depending on the business

› Key questions:

› How much capital is required for the business to succeed?

› What’s the revenue / cash flow / profitability profile you can attain?

› What is your ultimate goal for the biz?

p10


Venture Capital



VC Mat

hInvestment Total Value

› 3 Total Loss $ 15 $ 0

› 3 Return Investment (1x) $ 15 $ 15

› 3 Sell for profit (4x) $ 15 $ 60

› 1 Home run (10x) $ 5 $ 50

$50 $ 125

Typical Results – 10 Investments

We are wrong60% of the time!

p12


Companies

› 1200 review materials

› 500 face-to-face 40%

› 50 due diligencex 10%

› 10 investments x 20%

< 1.0%

Typical Pipeline for 10 investments VC

Math

p13

EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014 p14


Examples of 1200 Leads

Not competitive with any portfolio company

Not leveraging a connection for an introduction

Compelling concise elevator pitch

Not reading our firm’s website to see our focus area

Strong founder Not looking at my LinkedIn bio; call me wrong name

p15


Examples of 500 Meetings

Demonstrated product/ market fit; outside testing phase

Solves an important problem outside Silicon Valley

Well versed on market/competition

Don’t know actual numbers or metrics well

Not sure how to get to $1M, but

expect $50M in 5 years

Not strong technical team

p16


Examples of 50 Due Diligence

2-3X annual growth in revenue

Positive customer references

Positive team references

High churn

Not met projections fromprior meeting

Concentration ofcustomer base

p17


Examples of 10 Investments

Efficient customer acquisition

Strong team, where people followed CEO

Strategic to VC Portfolio

Market size ($300M vs. $1B)

Burn rate (need toraise too soon)

Valuation too high

p18


Revenue Loans



What are RevenueLoans™?

p20

Up to $1M or up to 33% of annualized revenue run rate› No set interest rate, payment, or maturity › Monthly payments are a fixed percent of net cash receipts › Matures in 5 years or when cumulative payments equal a set

amount, usually 1.5 – 2.5x principal› Small 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 C

umu

lativ

e P

aym

ents

Prin

cip

al

Loan Maturity

1.5xto

2.5xPrincipal


How Does it Work?

p21

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Period

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

Company revenueLoan payment


Early growth stage technology companies

Lighter Capital’s Investment Criteria

Financials:

› Revenue Min: $15k+ / month

› Gross Margin: High (50%+)

› Profitability: Not required, but clear path to profitability from our funds

› Other Debt: Not too high (unless convertible debt)

› Customer Base: No major concentration

› Recurring Revenue or Repeat Customers

Management:

› High ownership, full time dedication

Geography:

› HQ in US or Canada

Use of Funds:

› Growth: Sales, marketing, product

p22

Software, SaaS, digital media, tech services and similar


Lighter Capital’s Funding ProcessGet funded in as little a four weeks

p23

Result: We fund 18% of companies that meet our criteria

Company snapshot

Create a high level company overview online

in 10 minutes.

Getting the details

We will send you a link to upload and provide financial

statements, customer and team information followed by

one or two calls with our underwriting team.

Closing the deal

We issue a Term Sheet for review. Once agreed,

you are funded

STEP 1 STEP 2 STEP 3


Summary: How Do They Compare?

Bank / DebtRevenue-Based

FinanceVenture Capital

Guarantees &Controls

Financial CovenantsSometimes Personal

Guarantees

No Financial CovenantsNo Personal Guarantees

Partner in the Business (Board Seat, voting

shareholder)

Added Value Low / None Medium High

Dilution None / LowLow: Small Upside

Participation High

Payment Flexibility

Low: Fixed Payments

Medium: Variable Payments High: No Payments

Speed 4-8 months 4 weeksHighly variable. Typical

3-6 months focused effort

p24


Thanks!

Fundraising Resources for Salesforce ISV, OEM & SI Partnerswww.lightercapital.com/salesforce

Apply Online for a RevenueLoan from Lighter Capitalsecure.lightercapital.com/apply

http://www.lightercapital.com/salesforce?cmpid=701i0000000oi5T

https://secure.lightercapital.com/M1/Apply.aspx?cmpid=701i0000000oi5T

Small Business & Entrepreneurship

Funding Options for Salesforce Partners