The document discusses alternative financing options to equity and debt for growing companies, including revenue financing. Revenue financing involves an investment in a company in return for a share of topline revenue until an agreed cap is reached. This allows companies to retain full ownership and control without requiring a company valuation. Examples are provided comparing revenue financing to equity for two hypothetical companies.

1. Equity
&
debt
financing
aren’t
the
only
op7ons

2. www.nextstepcapitalpartners.com
Revenue
Financing
• Next
Step
Capital
Partners
invest
in
growing
companies
in
return
for
a
share
of
topline
revenue
– Repayment
varies
with
revenue
– Full
ownership
and
control
retained
– No
company
valua>on
required
– Returns
are
capped
• Compliment
/
alterna>ve
to
debt
or
equity

3. www.nextstepcapitalpartners.com
Debt
–
low
cost
when
available
• Requirements
– 2-­‐3
years
of
profits
– Loans
>ed
to
assets
(personal
guarantees)
– Restric>ve
covenants
– Retrospec>ve
vs.
prospec>ve
• Specialized
debt
arrangements
i.e.
Factoring
– too
cumbersome,
expensive
or
not
appropriate
for
many
companies

4. www.nextstepcapitalpartners.com
Equity
-­‐
fits
a
narrow
range
of
companies
• Requirements
– Rapid
growth
&
large
market
– Exit
required
for
a
return
– Investors
need
to
assert
a
high
level
of
control
– Company
valua>on
?
• Many
companies
rejected
not
because
they
aren’t
sound
businesses,
they
don’t
have
the
right
profile.

5. www.nextstepcapitalpartners.com
Revenue
Financing
• Fits
a
broad
range
of
companies
– “Lifestyle”
Businesses
– Services
– Family
Businesses
– Ownership
Transfers
• Does
not
an>cipate
or
require
a
sale
• Non
intrusive

6. www.nextstepcapitalpartners.com
What
we
are
looking
for
• Market-­‐proven
product
or
service
• Scalable
growth
opportuni>es
• Profitable
• High
gross
margins
• Successful
commied
owners
• Capital
requirements
$250K
-­‐
$2M

7. www.nextstepcapitalpartners.com
Investment
Structure
• Contract
to
pay
– X
%
of
topline
revenue
– Un>l
an
agreed
cap
is
reached
• Payments
vary
with
collec>ons
• Revenue-­‐share
is
paid
monthly
or
via
direct
pay
mechanisms
– Lockbox,
Credit
Card
payment
split
• Can
be
structured
as
debt
or
equity*
– Special
class
of
equity
with
rights
limited
to
repayment
• Lien
on
assets
only
to
enforce
contract
• Early
payment
op>on

8. www.nextstepcapitalpartners.com
Investment
Example
• Soeware
Co
– $3
Mil
Annual
Sales
– Profitable
– Projected
annual
growth
35%
with
capital
infusion
– Require
$500K
to
expand
sales
&
marke>ng
• Investment
$500K
• Revenue
Share
4-­‐5%
• Total
Payout
$1-­‐$1.5M
• Projected
Payoff
3-­‐4
years

9. Revenue
Financing
vs.
Equity
Revenue
Financing
• 4%
Revenue-­‐share
• ~
3
1/2
Year
Payout
• $1
Mil
Cost
of
Capital
Equity
• $6.0
Mil
Pre
Money
Valua>on
(2X)
•
$500K
=
7.7%
Ownership
• Valua>on
in
Four
Years
$20
–
50
Mil
(2-­‐5x)
• Cost
of
Capital
$1.5
–$
3.8
Mil
– $3
Mil
Sales,
35%
Growth,
Break
even,
$500K
Capital
So=ware
Co.
hp://revenuebasedfinance.com/2011/01/17/what-­‐would-­‐google-­‐do/
Google
Example
www.nextstepcapitalpartners.com

10. Revenue
Financing
vs.
Equity
Revenue
Financing
• 5%
Revenue-­‐share
• ~
4
Year
Payout
• $2
Mil
Cost
of
Capital
Equity
• $10.0
Mil
Pre
Money
Valua>on
(2X)
•
$1,000K
=
9.1%
Ownership
• Valua>on
in
Four
Years
$28.5
–
71
Mil
(2-­‐5x)
• Cost
of
Capital
$2.6
–$
6.5
Mil
– $5
Mil
Sales,
30%
Growth,
Profitable,
$1,000K
Capital
Manufacturing
Co.
www.nextstepcapitalpartners.com

11. www.nextstepcapitalpartners.com
Sales
Op>miza>on
Services
• Sales
Strategy
– Market
Iden>fica>on
&
Segmenta>on
– Channel
engagement,
Strategic
Partnerships
– Value
Proposi>on
Development
&
Differen>a>on
• Sales
Team
Development
– Interim
Sales
Leadership
– Hiring,
Training,
Mentoring,
Compensa>on
• Systems
&
Processes
– Sales
Force
Automa>on
&
Management
– Pipeline
Assessment
and
Revenue
Forecas>ng
– Deal
Management,
Strategy
&
Execu>on

12. www.nextstepcapitalpartners.com
Principals
• Patrick
Drew
– Strategy
and
enterprise
technology
project
management
and
implementa>on
at
Accenture.
– Early-­‐stage
sales
and
implementa>on
team
management
at
i2
and
Trilogy
Development
Group.
– Extensive
experience
mentoring
high
growth
companies
as
an
Angel
Investor
&
Consultant
• Daniel
Keelan
– Recognized
expert
in
developing
high
performance
sales
teams
through
consistent
processes,
systems,
training
and
mentorship.
– Learned
&
implemented
Valued
Based
Selling
Methodologies
and
Complex
Selling
at
IBM,
Oracle
&
i2.
Successfully
applied
these
approaches
at
numerous
smaller
organiza>ons.
– Extensive
interna>onal
sales
experience
having
lived
and
worked
in
Asia
and
Europe.

13. www.nextstepcapitalpartners.com
Patrick
Drew
512-­‐633-­‐4610
pddrew@nextstepcp.com
Daniel
Keelan
512-­‐217-­‐9012
dckeelan@nextstepcp.com
www.nextstepcapitalpartners.com