1Mby1M Virtual Accelerator Investor Forum: With Joe Silver (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Joe Silver was recorded in July 2020.

Joe Silver discusses his firm’s debt-financing model for startups.

Sramana Mitra: Let’s introduce you to our audience. Tell us about yourself as well as Lighter Capital. 

Joe Silver: I’ve been at Lighter Capital for about five years now. I joined when we were about 20 people. We had made about $20 million in loans and we’ve been able to scale quite well over the last five years. We support entrepreneurs all over the country in the United States and now globally with a unique financing model.

I have worked in corporate business finance and small business finance my entire career. I worked in microfinance, supporting entrepreneurs for six years. In the last seven years, I also worked in the US FinTech small business lending space.

There has been a dramatic amount of innovation and I think Lighter Capital has been at the forefront of that. It’s been an interesting and impactful space to be in. Lighter Capital is not an actual fund, we’re an operating company.

We have a couple of lending facilities where we lend capital to support entrepreneurs. We’ve raised over $200 million worth of capital. Most recently we closed a facility with a group called HCG Fund Management. It’s a private debt fund out of Raleigh.

We have fresh capital and we want to get it to entrepreneurs out there. In the last eight years, we have provided $200 million to over 400 startups, through about 700 loans. The loan is the keyword there. We don’t make equity investments.

We don’t make venture debt investments or a loan with a warrant. We just provide pure loans where we are due our principal and interest payment. We do that because we want to create a model where entrepreneurs can retain their ownership, not get diluted, make their own decisions, and grow their company.

We believe that entrepreneurs should be the ones developing great technology and then selling it and not having to get bogged down in the financing process. It takes a lot of time on the equity side and then most banks don’t lend to early stage technology companies. We lend capital through a diversified suite of products.

We have a revenue-based financing product on which the company started. It is an interesting vehicle whereby borrowers pay us back from a fixed percent of their monthly revenue. If you have lower month of revenue, you pay us a lower dollar amount and if you are growing quickly then that dollar amount increases over time. It is a highly flexible product intended to enable growth in companies.

We also provide term loans, which are relatively standard term loans with a fixed payment structure as well as lines of credit to help entrepreneurs with working capital needs. We want to provide different tools to help entrepreneurs succeed and scale their business. We lend up to $3 million.

Generally, we do that through multiple tranches as companies grow and perhaps not meeting all that debt on day one. We are there for them as they grow and scale to make subsequent loans. Our average loan size is roughly $400,000. In terms of the customers that we are helping, the vast majority are not VC backed.

We generally serve customers that are bootstrapped or ones who raised a very small equity round. They are looking for growth capital to invest in sales, marketing, and product. They perhaps want to raise equity down the road at a better valuation or they want to keep majority ownership and continue to bootstrap it. We are a fan of either of those strategies. We focus on growing companies and the scalability of models. 

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Joe Silver
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