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Funding Options for Salesforce Partners
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Transcript of Funding Options for Salesforce Partners
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Which funding option is right for your business?
Financing options for Salesforce Partners
June 5, 2014
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Emergence Capital PartnersLeading early stage Silicon Valley VC in SaaS and cloud-based services
› 100% focused on cloud software for business users, including software-as-a-service “SaaS,” mobile and information services.
› $575 million under management across 3 funds
Building market leaders
Our first investment. (market cap today: $32 billion)
SuccessFactors- IPO in 2007, acquired by SAP for $3.4 billion
Yammer – acquired by Microsoft for $1.2 billion
EchoSign – purchased by Adobe
Veeva – IPO (VEEV) in October 2013 (market cap today: $3 billion)
And Box, Lithium, InsideView, Hightail, Intacct, ServiceMax, Doximity, Insightly, SteelBrick and many more.
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Sean JacobsohnVenture Partner at Emergence Capital Partners
Cornerstone OnDemand (VP Channel Management)Joined at $7M revenue, now $300M revenue & $2B public company
WageWorks (VP Sales & Partner Development)Joined at $3M revenue, now $250M revenue & $1.5B public company
Elance (merged with oDesk)Joined at $0 revenue, now $100M revenue
Hightail (VP Worldwide Alliances)Emergence Capital portfolio company formerly known as YouSendIt
Emergence Joined as Venture PartnerSourcing business cloud startups for $250M fund. Works closely with portfolio companies Navera, Intacct, InsideView
15 years in business cloud
Sean JacobsohnVenture Partner,
Emergence Capital Partners
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Lighter Capital
› Lends $50K-$1M in growth capital
› Entrepreneur-friendly structure called a “RevenueLoan™” – revenue-based finance
› Tech-enabled analysis, diligence, underwriting and servicing. Goal: make funding fast and easy.
› Currently funding 3-4 total companies per month, including 1 Salesforce Partner per month
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Examples of Salesforce Partners funded
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
BJ LacklandCEO at Lighter Capital
BJ LacklandCEO,
Lighter Capital
Lighter Capital CEO in 2012
Power Efficiency Corporation CFO & DirectorSmall public energy efficiency technology company, raised $20M in equity financing, $5M in various debt financings
Summit Energy Ventures VP & Director (Partner)$25M venture capital fund focused on Series A & B rounds, PIPEs, convertible debt
Other Active angel investor and consultant to erarly stage companies. Senior finance and marketing leader at tech startups, EnCompass Globalization and webStrategic.
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15 years financing early stage tech companies,
either as an entrepreneur or investor.
Over $50M raised or invested
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Today’s agenda: Funding options for various “startup” stages of the business lifecycle
Funding options for Salesforce Partners
More on Venture Capital – Sean Jacobsohn
More on RevenueLoans– BJ Lackland
Q&A
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Funding Options
Which funding option is right for your business?
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Number of Financings
Source: US Census Bureau, Crunchbase, CB Insights
~6 Million US Business
90% of whom have 20 or fewer employees
127,100 small software companies
2,283 Angel and Seed InvestmentsSeed / Angel = 1.8% of small software companies per year
1,009 Series A InvestmentsSeries A = 0.8% of small software companies per year
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
A snapshot of funding options by stage
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+
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Different companies require different ‘financing roadmaps’
What type of business are you building?
› Long term goals, strategy and business model drive financing decisions
› Different ‘financing roadmaps’ available, depending on the business
› Key questions:
› How much capital is required for the business to succeed?
› What’s the revenue / cash flow / profitability profile you can attain?
› What is your ultimate goal for the biz?
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Venture Capital
Which funding option is right for your business?
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
VC Mat
hInvestment Total Value
› 3 Total Loss $ 15 $ 0
› 3 Return Investment (1x) $ 15 $ 15
› 3 Sell for profit (4x) $ 15 $ 60
› 1 Home run (10x) $ 5 $ 50
$50 $ 125
Typical Results – 10 Investments
We are wrong60% of the time!
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Companies
› 1200 review materials
› 500 face-to-face 40%
› 50 due diligencex 10%
› 10 investments x 20%
< 1.0%
Typical Pipeline for 10 investments VC
Math
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Examples of 1200 Leads
Not competitive with any portfolio company
Not leveraging a connection for an introduction
Compelling concise elevator pitch
Not reading our firm’s website to see our focus area
Strong founder Not looking at my LinkedIn bio; call me wrong name
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Examples of 500 Meetings
Demonstrated product/ market fit; outside testing phase
Solves an important problem outside Silicon Valley
Well versed on market/competition
Don’t know actual numbers or metrics well
Not sure how to get to $1M, but
expect $50M in 5 years
Not strong technical team
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Examples of 50 Due Diligence
2-3X annual growth in revenue
Positive customer references
Positive team references
High churn
Not met projections fromprior meeting
Concentration ofcustomer base
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Examples of 10 Investments
Efficient customer acquisition
Strong team, where people followed CEO
Strategic to VC Portfolio
Market size ($300M vs. $1B)
Burn rate (need toraise too soon)
Valuation too high
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Revenue Loans
Which funding option is right for your business?
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
What are RevenueLoans™?
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Up to $1M or up to 33% of annualized revenue run rate› No set interest rate, payment, or maturity › Monthly payments are a fixed percent of net cash receipts › Matures in 5 years or when cumulative payments equal a set
amount, usually 1.5 – 2.5x principal› Small upside participation
Example Loan› Annual Revenues: $1M› Principal: $200K› Maturity: 5 years› Payment: 5% of monthly revenue› Repayment: 1.75x principal ($350K)› Upside Participation: $50K at liquidity event C
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aym
ents
Prin
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Loan Maturity
1.5xto
2.5xPrincipal
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
How Does it Work?
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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 revenueLoan payment
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Early growth stage technology companies
Lighter Capital’s Investment Criteria
Financials:
› Revenue Min: $15k+ / month
› Gross Margin: High (50%+)
› Profitability: Not required, but clear path to profitability from our funds
› Other Debt: Not too high (unless convertible debt)
› Customer Base: No major concentration
› Recurring Revenue or Repeat Customers
Management:
› High ownership, full time dedication
Geography:
› HQ in US or Canada
Use of Funds:
› Growth: Sales, marketing, product
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Software, SaaS, digital media, tech services and similar
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Lighter Capital’s Funding ProcessGet funded in as little a four weeks
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Result: We fund 18% of companies that meet our criteria
Company snapshot
Create a high level company overview online
in 10 minutes.
Getting the details
We will send you a link to upload and provide financial
statements, customer and team information followed by
one or two calls with our underwriting team.
Closing the deal
We issue a Term Sheet for review. Once agreed,
you are funded
STEP 1 STEP 2 STEP 3
EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Summary: How Do They Compare?
Bank / DebtRevenue-Based
FinanceVenture Capital
Guarantees &Controls
Financial CovenantsSometimes Personal
Guarantees
No Financial CovenantsNo Personal Guarantees
Partner in the Business (Board Seat, voting
shareholder)
Added Value Low / None Medium High
Dilution None / LowLow: Small Upside
Participation High
Payment Flexibility
Low: Fixed Payments
Medium: Variable Payments High: No Payments
Speed 4-8 months 4 weeksHighly variable. Typical
3-6 months focused effort
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EMERGENCE CAPITAL PARTNERS & LIGHTER CAPITAL WEBINAR © COPYRIGHT 2014
Thanks!
Fundraising Resources for Salesforce ISV, OEM & SI Partnerswww.lightercapital.com/salesforce
Apply Online for a RevenueLoan from Lighter Capitalsecure.lightercapital.com/apply