Equity & debt financing aren’t the only op7ons
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Revenue Financing
• Next Step Capital Partners invest in growing companies in return for a share of topline revenue – Repayment varies with revenue – Full ownership and control retained – No company valua>on required – Returns are capped
• Compliment / alterna>ve to debt or equity
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Debt – low cost when available
• Requirements – 2-‐3 years of profits – Loans >ed to assets (personal guarantees)
– Restric>ve covenants – Retrospec>ve vs. prospec>ve
• Specialized debt arrangements i.e. Factoring – too cumbersome, expensive or not appropriate for many companies
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Equity -‐ fits a narrow range of companies
• Requirements – Rapid growth & large market – Exit required for a return – Investors need to assert a high level of control
– Company valua>on ?
• Many companies rejected not because they aren’t sound businesses, they don’t have the right profile.
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Revenue Financing • Fits a broad range of companies – “Lifestyle” Businesses – Services – Family Businesses – Ownership Transfers
• Does not an>cipate or require a sale
• Non intrusive
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What we are looking for
• Market-‐proven product or service • Scalable growth opportuni>es • Profitable • High gross margins • Successful commi\ed owners • Capital requirements $250K -‐ $2M
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Investment Structure • Contract to pay – X % of topline revenue – Un>l an agreed cap is reached
• Payments vary with collec>ons • Revenue-‐share is paid monthly or via direct pay mechanisms – Lockbox, Credit Card payment split
• Can be structured as debt or equity* – Special class of equity with rights limited to repayment
• Lien on assets only to enforce contract • Early payment op>on
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Investment Example
• Soeware Co – $3 Mil Annual Sales – Profitable – Projected annual growth 35% with capital infusion – Require $500K to expand sales & marke>ng
• Investment $500K • Revenue Share 4-‐5% • Total Payout $1-‐$1.5M • Projected Payoff 3-‐4 years
Revenue Financing vs. Equity
Revenue Financing • 4% Revenue-‐share • ~ 3 1/2 Year Payout • $1 Mil Cost of Capital
Equity • $6.0 Mil Pre Money
Valua>on (2X) • $500K = 7.7% Ownership • Valua>on in Four Years
$20 – 50 Mil (2-‐5x) • Cost of Capital $1.5 –$ 3.8 Mil
– $3 Mil Sales, 35% Growth, Break even, $500K Capital So=ware Co.
h\p://revenuebasedfinance.com/2011/01/17/what-‐would-‐google-‐do/ Google Example
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Revenue Financing vs. Equity
Revenue Financing • 5% Revenue-‐share • ~ 4 Year Payout • $2 Mil Cost of Capital
Equity • $10.0 Mil Pre Money
Valua>on (2X) • $1,000K = 9.1% Ownership • Valua>on in Four Years
$28.5 – 71 Mil (2-‐5x) • Cost of Capital $2.6 –$ 6.5 Mil
– $5 Mil Sales, 30% Growth, Profitable, $1,000K Capital Manufacturing Co.
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Sales Op>miza>on Services
• Sales Strategy – Market Iden>fica>on & Segmenta>on – Channel engagement, Strategic Partnerships – Value Proposi>on Development & Differen>a>on
• Sales Team Development – Interim Sales Leadership – Hiring, Training, Mentoring, Compensa>on
• Systems & Processes – Sales Force Automa>on & Management – Pipeline Assessment and Revenue Forecas>ng – Deal Management, Strategy & Execu>on
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Principals • Patrick Drew
– Strategy and enterprise technology project management and implementa>on at Accenture.
– Early-‐stage sales and implementa>on team management at i2 and Trilogy Development Group.
– Extensive experience mentoring high growth companies as an Angel Investor & Consultant
• Daniel Keelan – Recognized expert in developing high performance sales teams through
consistent processes, systems, training and mentorship. – Learned & implemented Valued Based Selling Methodologies and
Complex Selling at IBM, Oracle & i2. Successfully applied these approaches at numerous smaller organiza>ons.
– Extensive interna>onal sales experience having lived and worked in Asia and Europe.
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Patrick Drew 512-‐633-‐4610
Daniel Keelan 512-‐217-‐9012
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