Imagine that you run a SaaS startup and want to secure funding quickly online. You want the application process to be simple and the payment plan to accommodate the ebbs and flows of your SaaS business. You want follow-on funding to be available, potentially many times. And most importantly, you want to maintain full ownership of your company and not be pressured to run it a certain way or grow at a certain rate.
Enter Capital-as-a-Service, a form of funding that leverages technology to partner with startups as they grow. This flexible, revenue-based model automates the funding process to rapidly structure and fund loans so that startup founders can spend less time fundraising and more time growing their businesses.
What is Capital-as-a-Service?
Capital-as-a-Service is the efficient delivery of growth capital when a startup needs it as a startup grows. Capital-as-a-Service includes two primary qualities: a funding process expedited by technology, and a set-up that allows for further infusions of growth capital as needed.
1. Funding expedited by technology
Lighter Capital’s system automatically gathers information from the entrepreneur and third-party sources, such as banks, accounting software, CRM software, and LinkedIn, in order to process the application with minimal consultation.
The team has an initial exploratory call with the applicant, followed by one due diligence call. After these steps, they offer terms. Funding is often approved and provided within six weeks, and future funding rounds take only a couple weeks.
This approach to Capital-as-a-Service serves startups by substantially reducing the time and energy that entrepreneurs must spend fundraising. The entire process takes applicants about 10 hours of work and does not require in-person visits to the funder, site visits from the funder, or even a pitch deck. Simply creating a pitch deck for a VC funder can take as much as 40 hours.
“We’ve reduced the time spent on fundraising by over 90 percent,” says BJ Lackland, CEO of Lighter Capital. “Doing a round of fundraising can take a thousand hours and a hundred meetings. VCs fund just one percent of companies.”
Lighter Capital funds a much higher percentage of applicants who meet the basic requirement of $15,000/month in monthly recurring revenue (MRR). A far greater chance of success after a much shorter and easier application process greatly benefits busy startups.
2. Follow-on rounds of capital
Another key piece of the Capital-as-a-Service model is the ability for startups to easily get more funding when needed. The process for approval is quick and requires very little work on the part of the startup, allowing the company to keep focusing on operations and growth without distraction.
“Entrepreneurs are taught to go and raise a big amount of money and then race forward for 18 to 24 months, then go raise another big round of funding,” says Lackland. “Capital-as-a-Service is trying to change that. We want to help companies have more easy, ongoing access to capital as they grow.”
This model can lead to remarkable success as companies are infused with the cash they need to assertively and sustainably grow.
For example, Lighter Capital has given real estate startup ListReports seven rounds of financing over two years totaling $2.042 million without diluting ownership. During that time, ListReport’s revenue has grown 1,100 percent.
“The goal is to find good companies that you can start working with today and then continue to provide them with more and more capital,” says Lackland. “It’s more of a partnership model than an ownership model.”
Working as partners, Capital-as-a-Service providers have a vested interest in startups’ success and are ready to fund them in a friction-free and sustainable manner to help them get there.