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LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 Funding Options For Growing SaaS Companies

Funding Options for SaaS Compaines

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Page 1: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Funding Options

For Growing SaaS Companies

Page 2: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

About BJ Lackland

Lighter Capital: CEO since 2012 

Power Efficiency Corporation: CFO & DirectorPublic energy 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 early stage companies. Senior finance and marketing leader at tech startups, EnCompass Globalization and webStrategic.

MBA and MA in International Studies from University of Washington

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BJ Lackland, CEO Lighter Capital

15+ years financing early stage tech

companies, either as an entrepreneur or investor.

Over $50M raised or invested

Page 3: Funding Options for SaaS Compaines

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About Lighter Capital

52%

25%

21%

2%

SaaS

SaaS + Service

Tech-enabled services

Digital Media

› 100+ financings across 70+ companies

› Almost 80% are SaaS

› Revenue Based Financing for tech companies

› $50k-$1mm per company

› Technology + Capital = Better for Entrepreneurs

Page 4: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

› The best of debt and equity – aligned interests with no dilution

› Essentially a royalty agreement

› Monthly payments = fixed % of revenue

› Fits SaaS

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What’s Revenue Based Financing?

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

Company revenueLoan payment

Example Financing

› $500K funding

› Payment: 5% of monthly revenue

› Repayment: 1.7x principal ($850K)

› Maturity: 5 years

Page 5: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Today’s Agenda

Trends + Paths + Tradeoffs

Finding your funding path

Q&A

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Page 6: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

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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The Funding Landscape

Page 7: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Revenue$5m

Established

Ideation

Launch & Traction

Growth & Scale

BreakoutDebt

Equity

Bootstrap / Friends & Family

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Funding Paths for Technology Startups

Incubator / Angels

1. VC Backed

2. Non VC

3. Blended

Page 8: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Non VC Funding Path: Growth without dilution

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› Who: A SaaS company providing mapping and geo-analytics for Salesforce users.

› Funding: RevenueLoan from Lighter Capital in 2012. Total of 5 financings for $1M. The only outside money raised.

› Use of Funds: Product development, marketing and expanding the sales team.

Today

› Millions in revenue

› #227 on 2014 Inc. 500 fastest growing private companies in the U.S.

› #15 among software companies

› Grew 1,995% between 2010-2013

› Founders still own 80%+ of the company

Because of our close working relationship with the investment team, and how well they understand Salesforce’s AppExchange Partners, the initial funding and follow-on rounds have allowed us to bring in the capital we need very efficiently.

It’s great to be able to focus on growing my business rather than on looking for funding.

John Stewart, CEO Cloudbilt

Page 9: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Blended Funding Path: Grow to a Better Valuation

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› Who: SaaS solution for mental health professionals

› Funding: Initial Funding 2010 - $250,000

› Use of Funds: Increase engineering capability, attain product certification, sales and marketing

Today

› Millions in revenue

› Subsequently raised two rounds of equity financing totaling: $14M (Lighter Capital introduction)

› Increased revenues by >500%

› Grew from 10 to 60+ employees

“We had a responsible mix between equity financing and revenue-based financing. I’m glad we didn’t dilute more than we did.”

David Lischner, CEO Valant

Page 10: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Bank / DebtRevenue-Based

FinanceVenture Capital

Guarantees &Controls

Financial CovenantsSometimes Personal

Guarantees

No Financial CovenantsNo 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 weeksHighly variable. Typical 3-9 months of focused

effort

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Funding Option Comparison

Page 11: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © 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

Page 12: Funding Options for SaaS Compaines

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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

Page 13: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p13

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 to Focus on

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

Page 14: Funding Options for SaaS Compaines

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Q&A

Want to Learn More about Lighter Capital?Visit Our Website

www.lightercapital.comApply Online

www.lightercapital.com/applySee If You Qualify

www.lightercapital.com/how-it-works/see-if-you-qualify