Lighter Capital introduced at this time that it has secured entry to $100 million to lend to rising startups. The agency is best-known for its work with revenue-based financing, wherein increasing corporations repay borrowed funds out of future receipts. Lighter has additionally expanded into different, equity-free capital choices for startups within the final yr.
Lighter is most simply understood as a part of the group of corporations that present what TechCrunch has described as “alt-VC,” types of capital entry that don’t match into the standard enterprise capital mannequin of promoting shares (fairness) for money. With the VC methodology, enterprise capitalists elevate funds from rich capital swimming pools, disbursing the funds in items to numerous non-public corporations for an possession stake. These growth-focused corporations then attempt to scale quickly. People who succeed turn out to be priceless, rendering the enterprise funding profitable, and, hopefully, the enterprise capital fund worthwhile.
In alt-VC, varied types of debt are put to work, tailor-made to corporations which can be growth-oriented, usually current outdoors of the realm of what conventional banks would take into account lending-ready. Startups which can be working in software-as-a-service (SaaS) or e-commerce are sometimes thought-about superb candidates for alt-VC in its varied types, as returns that may be generated with marginally deployed capital are calculable with affordable certainty in these fields.
Acquired all that? Let’s flip to what Lighter Capital is as much as.
Lighter’s new $100 million entry to capital (we’ll name it a fund, for lack of a greater time period) will permit it to speed up its enterprise, the agency’s CEO Thor Culverhouse informed TechCrunch. Lighter has plenty of “concepts about how we’re going to develop [its] enterprise,” Culverhouse stated in a cellphone name, and having extra “entry to capital is a vital component to that development technique.”
In keeping with a launch, Lighter has “invested” over $200 million in additional than 350 corporations so far; nonetheless, despite the fact that Lighter’s loans return capital and will permit for the recycling of funds, the $100 million in new funds represents a step up in capability for the corporate. (Lighter is working with HCG for its capital entry.)
The brand new funds might be disbursed in additional methods than one. In June of 2019, Lighter added two extra conventional types of debt to its checklist of choices: time period loans and features of credit score. Culverhouse mentioned the extra merchandise with TechCrunch, connecting time period loans to revenue-based financing choices:
We did two issues. When you concentrate on the [revenue-based financing] operate we’ve at this time, it’s a time period mortgage, it’s simply that the compensation is predicated on no matter your month-to-month recurring income is. What we seen is a few individuals preferred that flexibility. We [also] seen a few of our clients stated, really, I’d somewhat have a really predictable fee stream. And so we got here out with one other time period mortgage that’s like every other time period mortgage, it’s simply as a predictable fee stream all year long. In order that they’re very, very a lot alike. After which we got here out with a line of credit score, which is extra historically used for working capital. So it’s a 12-month revolver, if you’ll.
Right here Lighter capital describes a hyperlink between revenue-based financing and common loans that’s price chewing on. Income-based financing is merely a mortgage, tuned modestly for the SaaS world. That’s it. It permits for recurring-revenue centered corporations to range their funds over time, however each a time period mortgage to a growth-oriented startup and a revenue-based financing occasion are fairly comparable at their core.
Which, naturally, makes Lighter’s transfer into extra conventional loans fairly affordable. With $100 million to place to work, Lighter goes to maneuver some money. That, at the side of the rising set of corporations providing comparable providers, ought to assist a whole lot of of us fund their corporations’ development with out promoting shares.