Experience on both sides of the funding table taught B.J. Lackland that traditional methods of seeking financing don’t work for the vast majority of technology entrepreneurs, so he set out to create one that did.
That path led to Lighter Capital, a company which helps technology companies grow without giving up equity, board seats or personal guarantees. The revenue-based financing model provides between $50,000 and $2 million in entrepreneur-friendly growth capital with flexible payments matching the ups and downs of that particular business.
Mr. Lackland said he has spent half his career in small business funding and the other half in technology dating back to the dot com days. He has been a venture capitalist and the CFO of a public energy technology company.
“I have been on one side of the table or the other of small business finance (for most of his career),” Mr.Lackland said.
Those dual perspectives showed Mr. Lackland there was a large gap between what equity investors normally fund and what debt investors like banks will.
“It’s inefficient and not applicable for many entrepreneurs,” Mr. Lackland explained. “An equity investor may fund one out of every 100 companies they look at, while 20 others are not a great fit for equity.”
The average loan size Lighter Capital provides is $288,000 and companies often get two distinct fundings as they grow, with repayment taking three to five years. A company receiving the average sum may see 10 angel investors contributing after a few telephone calls over a few weeks.
Those conversations are combined with data gleaned from the applicant’s accounting software, LinkedIn profiles, and customer reviews. Applicant performance is monitored with monthly financial updates.
“Long-term, the goal is to figure out how these companies will grow with a high degree of accuracy,” Mr. Lackland said, while adding they aim to have their revenue projections at least 95 per cent accurate to actual revenue. Should that company grow faster than expected, investors get a higher internal rate of return.
“The whole goal is to create a deep alignment between the capital source, the investor, and the entrepreneur. Instead of the unicorns, we just want to see solid-performing companies.”
Think of venture capitalists as Dave Kingman. They know they will swing and miss aplenty, but when they connect it hopefully goes a loooong way. You live with the strikeouts because the homers are worth it.
Lighter Capital wants to be Rod Carew, the master of the single who always gets on base and rarely strikes out, Mr. Lackland said. Their investors are not interested in quick exits and are willing to serve as a sounding board for the companies they fund. Combine dozens of experienced investors with novel technologies and Mr. Lackland believes he has a winner.