The First Ever Revenue-Based Financing Industry Report

Revenue-based financing industry report

After Funding 500 Deals, What Have We Learned?

At Lighter Capital we have provided over $155MM to startups through more than 550 rounds of revenue-based financing (RBF). In 2012, my first year at Lighter Capital, we funded 11 revenue-based financing deals. This year we expect to fund 200 deals. The growth has been spectacular.

Long ago we established a goal of funding 500 deals; we thought that many deals would establish revenue-based financing as a standard funding option for startups.

Having flown past our 500 deal goal, we’ve decided to share some hard-won insights. We want to help entrepreneurs, early-stage investors, startup board members and industry observers understand the revenue-based financing industry, pros and cons of revenue-based financing compared to conventional forms of financing, and best practices for those considering using revenue-based financing as growth capital.

Sample Industry Insights

  • The revenue-based financing market is growing rapidly, contrasting sharply with a decrease in the number of early stage angel and venture capital (VC) fundings.
  • Lighter Capital has a 72% market share for revenue-based financing deals.

Sample Deal Insights

  • 33% Rule: Total debt for pre-VC companies should be less than 33% of annual revenue.
  • Revenue-based financing is frequently used by entrepreneurs who have bootstrapped or in conjunction with angel financing.
  • Many entrepreneurs use revenue-based financing to maintain optionality for the future; after revenue-based financing, most startups go on to raise bank financing or venture capital or sell their companies.

Revenue-based financing Fits Many Companies

  • Diverse Growth Rates

Annual Revenue Growth of Lighter Capital Funded Companies Pre-Funding

  • Diverse Geographies: Funded companies in 30 states, including well established startup hubs and less mature ecosystems.

Top 10 states shown here:

Lighter Capital Customer Locations

  • Profitability is not required: Companies on average have negative 14% net margins.

Lighter Capital Deal Distribution by Profitability Level

Discover Why Startups are Turning to Revenue-Based Financing

Download our 30-page eBook in which we explore the changing landscape of tech startup financing, highlighting the growing trend of alternative financing options like revenue-based financing. This industry report is intended to educate entrepreneurs, early-stage investors, startup board members and industry observers about this emerging form of financing.

Revenue-based financing eBook