Funding Essentials for Salesforce Partners

EARLY GROWTH FINANCIAL SERVICES LIGHTER CAPITAL © COPYRIGHT 2014
Preparing Your Startup
for a Capital Infusion
Funding Essentials
for Salesforce Partners
July 10, 2014
Sirk Roh, COO – Early Growth Financial Services
Rob Belcher, Vice President – Lighter Capital

Lighter Capital
› Based in Seattle, WA
› Serial entrepreneurs, technologists,
angels and ex-VCs
› Tech-enabled specialty finance
company
› Direct business lender
› Not a bank, not aVC
› Employs an innovative revenue-
based finance model
› Uses technology to speed up and
simplify loan underwriting and
servicing processes
p2
Rob Belcher
Vice President
Lighter Capital

Sirk Roh
COO
Early Growth Financial
Services
Early Growth Financial Services
› Outsourced financial services firm providing
finance, accounting, valuation, and tax
support to small to mid-sized companies at
all stages of the development process
› Services include: transactional accounting,
strategic finance, CFO services, valuations,
and tax services.
› Clients includeTechShop, Klout, Indiegogo,
Zendesk, and 400+ small to mid-sized clients
nationwide
› Operations in SiliconValley, San Francisco,
Los Angeles, Seattle, LasVegas,Austin,
Boulder, Chicago, and NewYork City
› #5 SiliconValley Business Journal’s Fastest
Growing Private Company Award 2013
p3

Today’s agenda
Reflection:
Analyzing the Business
Projection:
Business / Fundraising Game Plan
Preparation:
Pulling It All Together
Documentation:
Required Documents and Information
Q&A
p4

Reflection: Analyzing the Business
Essential questions for analyzing your business model and economics
FINANCIALS
› What stage is the company? Pre-revenue? Cash Flow Positive?
› What is revenue / cash / pricing model?
› How much / what kind of financing have you taken in to-date?
CUSTOMERS
› Who is target customer?
› How many customers do you have? How many others exist?
› Customer acquisition cost, LTV, renewal rate, attrition rate?
SALES & MARKET
› What percent of revenue is from your largest customer? Largest 5? What does your
sales pipeline look like?
› How long is sales cycle?
› How big and where is your target market? How do you reach them?
TEAM
› What is make-up of current team?
› Where, if any, are gaps?
p5

Projection:
Business / Fundraising Game Plan
Whenyou’rereadytoraisefunds,clarityiskey
› How much money do you need to raise?
› What’s that money going to be used for?
› At what cost and with what terms and conditions?
› What type of capital is the best fit for your company,
and why?
› Where do you find the type of financing you need?
› Milestone financing
p6

Projection: Business / Fundraising Game Plan
A snapshot of funding options by stage
p7
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+

Funding Options: How Do They Compare?
Bank / Debt
Revenue-Based
Finance
Venture
Capital
Guarantees &
Controls
Financial Covenants
Sometimes Personal
Guarantees
No Financial Covenants
No Personal Guarantees
Partner in the Business
(Board Seat, voting
shareholder)
Added Value Low / None Medium High
Dilution None / Low
Low: Small Upside
Participation
High
Payment
Flexibility
Low: Fixed Payments Medium: Variable Payments High: No Payments
Speed 4-8 months 4 weeks
Highly variable. Typical
3-6 months focused
effort
p8

RevenueLoan: how does it work?
p9
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 revenue
Loan payment

Preparation: Pulling It All Together
What you need to impress potential investors
› Elevator Pitch
› Executive summary
› Financial model / budget
› Product demo
› Pitch deck
p10

Key slides in your pitch deck
Include elements that are most relevant for your company
› Who are you?
› Venture concept / problem to be solved
› Market opportunity
› Market strategy
› Competitive advantages and risks
› Technology
› Manufacturing/Production
› Management team
› Financials
› Funding requirements
p11

Business Plan
› Current business plan & financial projections
p12
Top-Down Projection
1. Start with market size
2. Identify particular segment
3. Extrapolate to calculate total
potential revenue
Bottom-Up Projection
1. Project revenue growth over
next 1-3 years
2. Calculate spending necessary to
achieve revenue/development
3. Headcount/milestone funding
1
2
3 1
2
3

The Fundraising Process
How to tackle fundraising as a business development exercise
› Business development process
› Determine your funding round
› Build your value proposition
› Identify the right investors given your stage, size,
industry, and focus
› Target key players
› Rely on your ecosystem
p13
Recommended reading:
Art of Start, Insider's Guide to Silicon Valley, Early Exits

Documentation: Required Documents
Necessary documentation and information for due diligence
Corporate Records
Security Issuances
Material Agreements
Intellectual Property
Disputes & Litigation
Other Information
p14
©

Corporate records and charter documents
› Certificate of Incorporation
› Articles of Incorporation (and amendments)
› Certificates of Designations, Rights, etc.
› Bylaws
› Minutes of directors' and shareholders' meetings
› Written consents of directors and shareholders
p15

Security issuances
› Company shareholders and option holders (showing
vesting & security exemptions)
› Outstanding options, warrants, rights
› Registration rights for company's securities
› All voting trust instruments, buy-sell agreements, voting
proxies or other shareholder agreements
› All permits and filings regarding securities issued by
company
p16

Material agreements
› Obligations / payments in excess of $10,000
› Personal property leases
› Company liabilities
› Property / asset related documents
› Loan or advance documents
› Employment agreements
› Insurance policies
› Employee benefit plans
› Any judgment by which company is bound
› Form of Proprietary Information and Invention
Agreements
p17

Intellectual property
› Foreign and domestic patents and patent applications
› Trademarks, trade names, service marks, domain names
or copyrights Proprietary processes
› Licensing agreements (to and from)
› Third-party correspondence regarding potential
infringement of IP rights
p18
©

Disputes and litigation
› Pending action, suit, proceeding, investigation
› Allegations of company's infringement of proprietary rights
of others
› Labor agreements or actions
p19

Other essential documentation
› Securities or ownership interests in other companies
› Certificates of qualification from all states or foreign
countries in which company is qualified to do business
› All licenses, permits or government authorization
› Company’s bank accounts, lines of credit, etc.
› Current or past officers, directors, or key employees who
own direct beneficial interest in any competitor
› Powers of attorney executed by company
p20

Q&A and next steps
Learn More:
earlygrowthfinancialservices.com
www.lightercapital.com
Apply / Contact:
earlygrowthfinancialservices.com/contact-us/
secure.lightercapital.com
Questions:
sroh@earlygrowthfinancialservices.com
rbelcher@lightercapital.com
p21
@LighterCapital
@EarlyGrowthFS

Learn More:
earlygrowthfinancialservices.com
www.lightercapital.com
Apply / Contact:
earlygrowthfinancialservices.com/contact-us/
secure.lightercapital.com
Questions:
sroh@earlygrowthfinancialservices.com
rbelcher@lightercapital.com
Q&A and next steps
p22
@LighterCapital @EarlyGrowthFS

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