Two Ways To Skip A VC Round With Alternative Funding Presented by Lighter Capital & Boast Capital boast.ai
Two Ways To Skip A VC Round With Alternative Funding Presented by Lighter Capital & Boast Capital
boast.ai
About Lighter Capital
52% 25%
21% SaaS
SaaS + Service
Tech-‐enabled services
Digital Media
› 230+ financings across 160+ companies
› Almost 80% are SaaS
› $120mm fund – very active!
› Revenue Based Financing for tech companies
› $50k-$2mm+ funding per company
› Technology + Capital = Better for Entrepreneurs
The Market Problem
Banks Highly risk averse. Not growth capital. Focused on profitable firms with hard assets. $300B in SBA Loans $280B in SMB unmet need VC/Angel
Unicorn hunters 1% of Startups raise VC ~$8B invested in ~4,000 early stage deals / year
How can we get capital to
grow our businesses?
“Fewer than 1% of startups raise venture capital.”
IPO
Friends/Family
VC Series-C
Incubators/Angels
$0 $200K $12M
VC Series-A
Banks
$100M
Bootstrappers
VC Series-B
VC Series-D
We help bootstrappers stop using personal resources without dilution. We also help startups raise VC funding at much higher
valuations later, by improving their metrics in the near-term.
Sample company growth journey
SOLUTION
Revenue-Based Financing
Alignment: The faster the company grows, the higher
Lighter Capital’s IRR
Blend between bank debt and venture capital
No equity dilution. No personal guarantees
• Structured like a royalty
agreement • Capital provided in return for a
fixed percentage of revenues
• Repaid monthly until a multiple of the loan amount has been paid
Long-term growth capital with the best features of debt and equity
No equity dilution or warrants
No personal guarantees
Follow-on funding = APPROVED!
Initial Funding 2-4 weeks (follow on 1 week)
Flexible payback options
BENEFITS
No equity dilution/board seat No personal guarantees
Get funded in 2-4 weeks Flexible payback options
SOLUTION
We typically fund companies that:
• Have $15K - $1M/month in revenue • 6 months of revenue history • Have recurring customers (SaaS) • Are U.S.-based or U.S.-focused • Are on a path to breakeven/
profitability • Use of funds for growth
ELIGIBILITY
VC Later Hack����������� ������������������ the����������� ������������������ VC����������� ������������������ game����������� ������������������
• Came to Lighter with a terrible term sheet
• Instead, took $1.2M of our funds over 36-months to greatly improve business metrics
• Then raised a $7.2M Series-A at 11X better terms – a 1,000% increase in founder wealth
• Maintained control of his destiny
CASE #1
VC Never Grow����������� ������������������ without����������� ������������������ dilution����������� ������������������
• 100% bootstrapped business
• Used $200K+ of our funds over 36-months to greatly improve business
• Today, company has millions in revenue, founder owns nearly 100%
CASE #2
NOT JUST FUNDING: We have a thriving community of 157+ SaaS co-founders, 96+ VPs of sales and marketing, and 129+
additional mentors, who regularly share wisdom and help each other grow.
FOUNDER DINNERS
BI-WEEKLY PEER-ADVISOR CALLS
PRIVATE RESOURCES
RECRUITING HELP
EXPERT ADVICE
COMMUNITY
Everything You Need to Know About R&D Tax Credits Presented by Lloyed Lobo
boast.ai
Agenda
– Overview of the R&D Tax Program – Benefits – Qualification Criteria – Case Study – IRS Requirements – Do’s and Don’ts – Q&A
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What Is R&D Tax Credit?
– General business tax credit for businesses that incur R&D costs in the US
– Established in 1981, made permanent in 2015
– Credit can be claimed on all open tax years (typically 3)
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How Can I Use It?
– Carry back to the previous year
– Current tax year or carry forward 20 years
– Payroll taxes up to $250k / year
– Alternative Minimum Tax
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But I’m Not Profitable
Offset payroll taxes up to $250k / year if you:
– Have revenues for 5 years or less
– Have $5m or less in revenue for the tax year
– Are not a tax exempt organization under 501 Additional credits can be carried forward.
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But I’m Not Profitable...
Offset AMT if you have less than $50 million in average revenue for 3 preceding years. Find out what your AMT is.
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Applicable Industries
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What Can I Claim?
– US employee salaries
– US subcontractors costs
– Materials consumed in R&D
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How Much Can I Recover?
Federal – 6% of eligible expenditures or – 14% of half of the average R&D expenditures over
the past three years. If expenditures remain constant over a three year period, this method results in a 10% credit
State
– Differs from state to state – California is 15% of eligible expenditures,
calculated as 15% of half of the average R&D expenditures over the past three years
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How Do I Qualify?
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How Do I Qualify?
5 questions to determine if you qualify: 1. Was there a scientific or a technological
uncertainty that could not be removed by standard practice/engineering?
2. Did the effort involve formulating a hypothesis specifically aimed at reducing or eliminating the uncertainty?
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How Do I Qualify?
3. Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypothesis?
4. Did the process result in a scientific or technological advancement?
5. Was a record of the hypothesis tested and results kept as the work progressed?
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Case Study
– Software startup with operations in California
– 7 developers (1 front-end, 6 back-end)
– Salaries are $150K per year and ~80% of time is eligible
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Case Study
– Front end development typically not eligible
– Eligible expenditure pool for salaries would be ~$840k
– Federal portion → ~$50k, California portion → $63k
– Total R&D tax credits received are $113k. Could be ~$122k+ if 3 years of consistent R&D spend
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When To Claim?
– Must be specified, elected, and filed on the original 2016 tax return before you can begin to offset payroll taxes in 2017
– March 15: S-Corps with Dec YE. Others need to claim by the 15th day of the 3rd month following the end of the tax year
– April 15: C-Corps with Dec YE. Others need to claim within 3.5 months following the end of the tax year
– You can request a 6 month extension boast.ai 29
Technical Documentation
– Documented at the time the work was completed
– Highlight technical challenges
– Dated
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Technical Documentation
Document technical challenges/obstacles as the work progresses:
– Capture the problem and the iterations undertaken to attempt to resolve the problem
– What are the different hypotheses and how was
each hypothesis tested?
– For a typical software project, only the major technical challenges/obstacles encountered by the team in a month need to be documented – not every little problem.
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Time Tracking – Track time by project and
activity
– Track all activities, including non-R&D
– Any type of system can be used (or excel if you don’t have one)
– Time sheets can be entered daily or weekly and at half or quarter day intervals
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IRS Review
R&D Tax Review ≠ Tax Audit Multiple types of Reviews:
– Technical – Financial – Technical & Financial
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Do’s
– Pay yourself and staff
– Document activities and track times
– Incorporate your company
– Verify PEO arrangement boast.ai 34
Don’ts
– Underestimate the importance of documentation
– Focus on the business opportunity
– Leave R&D claims until the last minute
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Q&A Lloyed Lobo 650-452-5009 [email protected]
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