the game is changing

I'm speaking on a panel next week as part of the MIT Enterprise forum here in Seattle. The topice of the talk is Venture Funding - It's a New Game. The game has for sure changed, and I think the success of Founder's Co-op, TechStars and Lighter Capital shows some of the ways entrepreneurs and investors are adjusting. 

The panel is a good mix of people across the startup funding landscape, with a wide range of experiences. I think it should be a really interesting talk, so no matter where you sit in the startup funding world (entrepreneur, investor, service provider), I think there will be some juicy nuggets you can catch here. Check it out next week - details below.

----

Have you heard about recent exits in which start-ups have been acquired for several million dollars within a couple of years of founding with little or no outside investment? Or clean energy start-ups that can’t raise the millions needed to grow their business? Or a game company that sold for hundreds of millions of dollars with relatively little VC participation? What’s going on? 

Join us as Rebecca Lovell, Chief Business Officer at GeekWire, moderates our panel of industry insiders including:

• Frank Artale, Partner, Ignition Partners
• Tom Duterme, Corporate Development Director, Groupon
• Andy Sack, Co-founder of Lighter Capital, Judy's Book and several acquired tech companies
• Dan Shapiro, Kept Entrepreneur at Google

Our panelists will tell us where acquisition and venture money is coming from today, including specific deals. They will explain new venture funding models such as revenue financing and incubators that offer mentors, connections to investors, and significant cash. More importantly, they will provide a framework for understanding how funding in the Northwest has been transformed by increased capital efficiency, technological development, and the global economic malaise, as well as explain the impact on entrepreneurs and funders, such as angels, VCs, and corporations.  

Audience Takeaways

Audience members will learn:

• Details of recent Northwest exits and financings
• What has changed in the last two years
• About the explosion in new ventures and trends in capital efficiency
• What acquirers and investors are looking for today
• What is hard to fund and why
• About new venture funding models such as revenue financing and incubators with advisors, connections to investors and cash

How to be a fintech company

There are 5 fintech companies that I've been paying attention to as I try to figure out the model for Lighter Capital -- actually -- there's many more than that...but for the purpose of this blog post, let's focus on:

1. Second Market
2. Receivables Exchange
3. Wanga (UK)
4. Kabbage
5. OnDeck Capital

There are lots of differences and variants to these businesses but I like all of them and it seems like they follow a somewhat simple formula.

• Market segmentation -- Each company in its own way focusses on a market that is underserved by the capital markets.  One way or another, the underlying businesses need capital. 

• High rents (i.e charge a lot) The above businesses make capital available to the customer via the internet and charge a rather high rent. Wanga is off the charts!

• They've figured out repeatable customer acquisition --  to varying degrees the above customers has each figured out how to acquire customers cost effectively.

At lighter capital, we're trying to make sure we accomplish these goals as quickly as possible. 

Risk adjusted returns: Struggling to balance the gas and brake pedals

My career as an entrepreneur and as a seed stage equity investor has me look at a company and a team and think about what could go right.  It has me dream the possible. While working on refining the boundaries of a RevenueLoan, I find myself really thinking hard about reality -- and what could go wrong.

I find myself focused on risk-adjusted returns and yield. Prior to Lighter Capital, I never really thought about those concepts. Internally, we're debating the benefits of providing smaller revenueloans to companies earlier in their revenue life cycle. So, I find myself wondering -- what risk am I taking by moving earlier? Traditionally, people would say that moving earlier increases the risk -- and that's the obvious answer. But there's some benefit from a risk perspective to moving earlier. The main thing I find myself thinking about is that the fixed costs that get a company in trouble further into the revenue life cycle are not yet in place and so the entrepreneur is able (theoretically) to better able structure the organization to include those fixed costs.

The other thing to I find myself wondering about is that for each marginal dollar earlier in the revenue life cycle, I think I'm likely increasing my potential return by much more than one dollar. One dilemma for me is how to think about pricing this risk -- and there, frankly, right now, I have no clue! ;-)

Market education and awareness is top of mind

One of the topics that is top of mind for me at Lighter Capital is where and how are we going to get customers familiar with revenue based finance broadly and our RevenueLoan product specifically.

Once entrepreneurs and small business owners understand what we're doing, we should be a lot more effective in coming to terms with them and closing investments. That said, it's clear to me that we're in the early stages of market development for a new type of financial product. We have this new product that has some compelling advantages over other types of funding -- but if no one knows about the product and those benefits, it's hard to get customers.  We have the added challenge of not only having to educate small business owners and entrepreneurs but we also have to educate the lawyers that represent these business people.

In order to educate people about our product and our firm, I think I need to be communicating more about the process of growing this company. This should be straight forward as long as I have the time -- there's lots of interesting nuances and challenges we face.

blogging at Lighter Capital

Phew, in case you didn't hear - TechStars demo day happened last week which was both an awesome event with a lot of great people and another great moment for Seattle startups. For me personally, it marks the end of 3+ months of hectic schedule balancing the whirlwind time I spend running TechStars here in Seattle with my ongoing work at Lighter Capital and Founder's Co-op.

Among the things that I struggle to keep up with (sleep, family time), it's harder for me to find time to blog. So expect me to get back into the swing of things very soon. But as we build Lighter Capital into a full fledged, web-based site, I plan to split my blogging time between here and there. There's stuff I write about here that wouldn't fit for the brand we're building at Lighter Capital, and vice versa. 

As such, today I wrote my first blog post yet on the Lighter Capital blog. Expect more to come, and it may not be of interest to you, but wanted to let you all know that there's now more literary gold from yours truly that you can find over at www.lightercapital.com/blog.

My first post is about fighting financial fraud as a tech-enabled lender. Sound awesome? check it out over there.