SAN FRANCISCO (Reuters) - Lighter Capital, an alternative financing startup, announced on Friday it has raised a $100 million fund that will be invested in emerging tech companies.
Seattle-based Lighter Capital, which is part of the growing fintech sector that uses mobile and Web technology to replace traditionally paper- and people-based financial services, uses a Web platform to collect data on tech startups looking for funding and analyzes their growth potential.
To the more promising ones, Lighter Capital offers loans up to $2 million that startups repay over a few years, based on how quickly their own revenue is growing.
The $100 million fund is Lighter Capital’s second; it raised $20 million in early 2014.
Lighter Capital also announced on Friday that it has closed a $9 million Series B, its second round of venture capital funding, which will be used to grow its own operations.
It has now raised a total of $16 million from venture capitalists including Voyager Capital and Summit Capital.
Lighter Capital is an alternative to angel investing - individual investors who put relatively small sums of money into startups very early on - and its deals lack the onerous financing structures often found in traditional venture capital.
The financing startup does not take board seats or a stake in the companies it funds, or require an exit. Deals are structured like loans, and fees are an additional 75 percent on average of the original sum, said CEO BJ Lackland.
Lackland, a former venture capitalist, said the model works best for founders who do not want to give up too much ownership to investors, even if it means having less money to grow.
“You don’t have a VC sitting over your shoulder and taking part of your company,” he said.
But companies also do not get the mentorship and guidance VCs offer, nor the validation that comes with backing from storied firms such as Andreessen Horowitz.
Lighter Capital has backed about 85 companies since 2011, including $750,000 of funding into IT security testing company Redspin, which was acquired earlier this year.
It closes on average six financing deals per month, Lackland said, a dramatically quicker pace than VC firms.
“The breath of what we can fund is much greater than what a VC can do,” Lackland said. “We can fund companies that are growing at 20 percent per year and aren’t going to be gargantuan returns.”
Editing by Christian Plumb