In a climate where securing venture capital funding has become notably challenging, Lighter Capital is continuing to offer non-dilutive financing to technology startups through its revenue-based financing approach.
Established in 2010 and led by CEO Melissa Widner, Lighter Capital has provided hundreds of millions of dollars in financing across over 1,100 rounds of growth capital. Importantly, startups are not required to relinquish equity. The firm’s growth capital has exceeded $350 million.
Lighter Capital’s revenue-based financing model caters to technology companies in sectors like SaaS, technology services, subscription services, and digital media. These companies should already have revenue and be experiencing growth. The financing entails adaptable payment terms, fixed monthly payments, and contract financing.
Now, Lighter Capital has secured its own funding: $130 million in capital commitments for a credit facility. Existing investors, including Apollo Global Management, i80 Group, Invest Victoria, and iPartners—an Australian private credit fund—back the facility.
Alternative financing is currently a focal point, with numerous U.S. companies offering revenue-based financing to SaaS enterprises. Among them are Capchase, Pipe, Founderpath, Arc, and the recently launched Efficient Capital Labs.
This trend can be attributed to a couple of factors. First, venture capitalists have scaled back their funding efforts in the past year, a fact that has been widely covered. Second, more company founders are realizing that alternative financing options exist, particularly in light of the collapse of Silicon Valley Bank, according to Widner.
She explained, “One of the biggest challenges has been just educating companies that there is an alternative to dilutive financing. Venture capital firms fund a really small percentage of technology companies, like 1% of technology companies, so in the last few years, people are starting to understand that you actually can get funding other than going down the VC path.”
As a consequence, Lighter Capital has observed an uptick in companies approaching them who would otherwise have sought VC backing. Some enterprises opted against priced rounds in the current market, while others were actively seeking non-dilutive funding. Additionally, the firm encountered companies in solid shape, boasting around 24 months of runway, yet wanting an extra buffer during challenging economic times.
Widner noted that the firm’s inbound inquiries are burgeoning, leading 2022 to be the most successful year in Lighter Capital’s history.
The proceeds from this fresh financing source are projected to support a multitude of early-stage companies in the United States, Canada, and Australia. The financing range spans from $50,000 to $4 million, with an average financing size of $600,000.
“SaaS revenue is generally predictable,” Widner remarked. “We’ve spent more than a decade building technology to be able to predict a company’s revenue, and we typically do a better job at predicting their revenue than companies do. Our financing rounds, or loans, are typically three years, so we’re actually looking at being able to predict if the company’s revenue is going to be sufficient to pay back the capital in three years.”
