Andy Sack on Lighter Capital: Expanding Beyond RevenueLoan to Finance More “Weird Stuff that Makes Money”

Premium goat-milk ice cream. Bouncy-house rentals for kids’ parties. Electronic medical records for psychiatrists. None of these sound like your textbook target for early stage investors, who are often found hunting consumer tech startups that can turn into billion-dollar home runs.

For ubiquitous Seattle investor and entrepreneur Andy Sack, that’s precisely the point. Those three very different businesses are companies supported by RevenueLoan, the alternative financing startup that Sack unveiled about a year ago in his mission to disrupt the traditional investment market. These days, Sack is repositioning RevenueLoan as Lighter Capital—a name change that he says reflects a broader focus and an overall attitude that’s much less buttoned-down than your average bank or venture capitalist.

I stopped by Sack’s Founder’s Co-op/Seattle TechStars office recently to get a better idea of what the changes will entail, and what the first year has been like for one of the more prominent experiments with an emerging investment model known as revenue-based financing.

Check out Xconomy’s story from last year for a more exhaustive rundown of how it all works, but here’s the short version: Revenue-based financing is a loan that’s repaid by sending investors a slice of top-line revenue, typically in the 1-10 percent range, up to a hard cap of three-to-fivefold return on investment. So, in exchange for taking no equity stake in the startup, an investor can make money without an IPO or acquisition. For Seattle-based Lighter Capital, loans typically top out at $500,000. The company was started with $6 million from Voyager Capital, Summit Capital, and Founder’s Co-op, and Sack says Lighter Capital might look to raise more money in a year or so.

The first year has seen 10 deals on a range of companies. About half of them have some kind of technology focus, such as lead generation or software-as-a-service—“stuff that is just never going to be a huge company, but solves a real problem for a set of customers,” Sack says.

One early investment was in Valant Medical Solutions, which helps psychiatrists and other mental health professionals streamline their administrative burden by shifting things like patient records, prescribing, and billing to Web-based software. The Seattle-based company was started by a pair of brothers: psychiatrist David Lischner and software developer Ben Lischner.

“It’s a niche,” Sack says. “They might get huge, but it’s more likely they end up at a $5 million-a-year, $10 million-a-year business.”

Other investments include Mimja, which operates a Web-based lead generation and rental company for those big bouncy houses that kids (and adults) like to hop around in; and Laloo’s, whose … Next Page »

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