Lighthouse offers a wide variety of financing products, structured to meet your needs. These products fall into two broad categories:
Growth capital. Provides operating capital for product development, product or geographic expansion, acquisition of technology, or just about any key operational imperative.
Equipment financing. Allows you to borrow against the equipment you purchase, such as computers, manufacturing equipment or other assets, and free up equity dollars for higher ROI use, such as research and development or sales and marketing.
We recognize that no two companies are alike, so we don't apply just one product or one financial template to all of our portfolio companies. We work with you to decide how to best incorporate debt as part of your overall financial strategy. Based on our extensive experience working with start-ups, we can advise you on how to analyze your investment needs over time and get the maximum return from your operating capital.
We also understand that financing, while a crucial tool in the entrepreneur's arsenal, is just as important as time. We have a very efficient process for qualifications and approval, and our financial managers and support staff – all of your day-to-day contacts – are trained to respect your time and be responsive to your needs.
Benefits of Venture Debt
From a financial strategy point of view, venture loans can be a useful, even critical insurance policy. To help ensure that you reach an important customer or product milestone, you can use venture debt to extend the runway to achieve those milestones and enter your next equity fundraising event with a better valuation. Most venture capitalists encourage their portfolio companies to take on a responsible mix of debt and equity dollars.
For example, a communications start-up needs a round of financing totaling $20 million. Of this amount $5 million is for equipment. The company could try to raise the entire $20 million in equity financing from venture capitalists, but that would cause more significant dilution at the time of liquidity. Their financially astute management team decides to raise $15 million from venture capitalists and $5 million from Lighthouse in the form of equipment venture debt. This financing model preserves more of the employees' stake in the company and also creates a stronger balance sheet.
Venture debt is also handled differently from traditional bank loans. For example, banks may require that you maintain a minimum account balance with them equal to the amount you borrow. The practical result is that you are borrowing your own money. At Lighthouse, we lend you our money. Banks also often tie loans to receivables, which can be tough for companies that are just starting to achieve revenue.
Banks also want to convert you to traditional commercial credit, and may structure their terms to include financial covenants and letters of credit that direct and reduce your operating flexibility. It is also extremely difficult for banks, as regulated entities, to restructure or refinance loans, which eliminates the possibility of flexibility just when you might need it most.