Lighter Capital Completes 101 Deals in 2016 to Reinforce its Position as Nation's Most Active Investor in SaaS Companies

SEATTLE, Feb. 8, 2017 -- Lighter Capital, the leading provider of revenue-based financing for early-stage growth companies, reinforced its position as the most active investor in software as a service (SaaS) technology companies in the United States, based on deal flow and investments in 2016.

Lighter Capital invested $26 million in 101 deals in 2016, a 90 percent increase in deal volume from 2015. The firm was particularly busy last December when it completed 24 deals, including 11 during the week between Christmas and New Year’s Day.

Overall, Lighter has funded 150 SaaS and other tech companies and completed 225 initial fundings and follow-on deals since it was founded in 2010.

“Revenue-based financing has quickly become a mainstream funding alternative for early-stage companies, something that’s reflected very emphatically in our growth statistics in 2016,” said BJ Lackland, chief executive officer for Lighter Capital. “It’s very attractive because it’s non-controlling, non-dilutive and enables entrepreneurs to focus on company business rather than arduous task of fund raising.”

Lighter Capital announced its 2016 growth statistics today in conjunction with SaaStr 2017, the largest annual conference in the U.S. for SaaS companies. Lighter Capital is a Gold Sponsor for the 2017 SaaStr conference, which runs Tuesday through Thursday in San Francisco.

Lackland said the company’s steadily growing pace of investments is driven by two key elements: Lighter Capital’s proprietary technology and the demand from entrepreneurs for alternatives to traditional venture capital funding.

Lighter Capital helps entrepreneurs grow their companies without giving up equity or control. Venture capital firms often require founders to give up between 20 to 40 percent of equity in their company as well as a board seat in exchange for growth capital, Lackland said.

Lighter Capital provides revenue-based financing, which is leveraged against future revenues. For example, with a revenue-based funding model, a company agrees to share a percentage of future revenue with an investor in exchange for up-front capital. The loan payments are tied to monthly revenue, going up for strong-revenue months and down for low-revenue months.

As a result, investors and entrepreneurs are working toward the same goal: higher revenue, Lackland said.

“The faster a company grows, the faster it can pay off the loan,” he said. “If a company stalls out, neither the entrepreneur nor the investor wins. This stands in sharp contrast to conventional debt financing, where loans must be paid off regardless of revenue performance.”

Additionally, Lighter Capital’s technology, which analyzes risk and predicts the internal rate of return of investments, has gotten dramatically better due to improvements in software and data science, Lackland said. That enables the company to predict long-term revenue projections for its portfolio companies with more than 95 percent accuracy.

“As a result, we can evaluate and execute investments at a high scale, often funding more than 10 companies a month,” he said. “It’s a unique approach that’s very beneficial to entrepreneurs.”

One of the primary benefits is the speed at which the funding can happen, Lackland said. For many entrepreneurs, looking for funding under the traditional models becomes a full-time job and takes them away from their real business, he said.

Indeed, entrepreneurs seeking funding via traditional models such as venture capital and angel investors contact nearly 60 investor groups and actually meet with 40, many of them several times, according to a 2015 survey conducted by TechCrunch.

“Obviously, there are huge opportunity costs here in time and expense for entrepreneurs and their teams,” Lackland said. “By contract, our process involves an online application, evaluation of the application via our software and a handful of follow-up phone calls. Usually, a funding happens within three to six weeks, not six to eight months.”

While revenue-based funding is relatively new for technology companies, the model is used frequently and successfully in other industries, Lackland said.

“We’re not reinventing the wheel,” Lackland said. “We’re just applying it to an industry where the older models don’t always work for entrepreneurs. The funding approach is identical to how Hollywood finances films, how the energy sector finances solar and gas projects, and how the pharmaceutical industry allocates capital in efforts to discover new cures and drug treatments.”

Many companies that received early-stage funding from Lighter Capital go on to receive subsequent funding rounds from traditional venture capital companies.

For example, MapAnything received five rounds of funding totaling $1.2 million from Lighter Capital over a three-year period. Last week, MapAnything closed a $33 million Series B funding round from Columbus Nova, Salesforce Ventures and several other VCs.

“Our company wouldn’t have existed if no one had gambled on us—and Lighter Capital did,” said MapAnything CEO John Stewart.