The Seattle investment company targets small companies, using software it has developed to identify prospects. Its investments return a percentage of the startup’s revenue instead of taking an equity position.
Seattle-based Lighter Capital has raised a $100 million fund to invest in growing technology startups.
Lighter, which has 24 employees, raised the fund from investment firm Community Investment Management. It was founded in 2010 by Andy Sack, a Seattle investor and startup veteran who also co-founded investing firm Founders Co-op and is the former managing director of TechStars Seattle.
Lighter does not take a traditional venture-capital approach. Rather than taking an equity stake when it invests in a company, it gets paid a set monthly percentage of the company’s revenue. Lighter is somewhere between a bank and a VC firm or, as Chief Executive B.J. Lackland puts it, “VC-lite.”
“The idea with this was really to create a sort of middle ground where it’s not dilutive to the entrepreneur, but at the same time it aligns with the interest of the investor,” Lackland said. It allows startup founders to retain more control of their firms, or “their baby,” he said.
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Lighter also takes a different approach in selecting companies. It develops in-house software that evaluates and tracks businesses by looking at data from QuickBooks, bank accounts, LinkedIn accounts and other sources. “We can fund in a fraction of the time and effort,” Lackland said.
That’s how Lighter got linked with Community Investment Management, a large fund in San Francisco that invests in companies that fund startups primarily through the Internet as opposed to traditional in-person networking.
“We really see ourselves as making capital more available to lots more companies in a far more efficient way,” Lackland said.
Lighter also announced it raised its own $9 million round to continue developing its software. The series B financing round comes from individual investors, including board member Jeff Seely and venture-capital firms Voyager Capital and Summit Capital, which are represented on Lighter’s board.
The new $100 million is five times the size of Lighter’s last fund, raised in 2014. That means the company will be able to at least double the number of investments it makes every month, from six to 12 deals, Lackland said.
Lighter invests in pretty much every kind of technology company, especially in software-as-a-service ventures. It makes small investments, usually about $250,000, but up to $2 million, and tends to invest in the same company multiple times.
Lighter’s investments in 81 companies include Likeable Local, which develops social-media software for small businesses; and Tidal, which connects creative talent with brands. Both are based in New York.