The deal came together surprisingly fast, and in unique fashion, Lendio CEO Brock Blake said. Lendio had been progressing toward a deal with several groups before Napier Park became involved.
That involvement began at the Money 20/20 Conference in November when Napier connected with Lendio board member Brian Hirsch.
“The week we got back from Money 20/20 we had an introductory call that we were very excited about and we believe Napier was excited about what they heard,” Mr. Blake said.
“On that first call we said we got other groups ready to put down term sheets within the next week so you gotta run and they certainly did.”
Napier Park’s Dan Kittredge had been keeping an eye on the alt-fi industry for a while and was hearing good reports about Lendio’s products and technology.
“We were very impressed,” Mr. Kittredge said. “We made one call to Brock to review the technology then immediately flew up to visit the company and inserted ourselves into this capital raise process.”
“I think we move pretty quickly because we were really excited about what Brock developed. One we got a better understanding of the company and their solutions we definitely moved quickly to get to a term sheet.”
The speed with which this deal came together belies the lengthy process capital raises typically are for any company. The constant networking and reaching out to contacts, numerous flights, many meetings, almost as many imperfect fits…
“Fundraising in general is a two-sided sword,” Mr. Blake advised. “There are some exciting aspects as you are talking to some very exciting groups and some very exciting people. You’re getting guidance on your business and they are helping you to think about it strategically.”
“The other half of that is every minute you’re fundraising you’re not necessarily focused on growing your business. You’re out meeting the people and on a plane more frequently than you’d like to be.”
It helps to be very clear on what you are looking for before you start, Mr. Blake said.
“When we went into it there were a few things that were important to us. The first was finding the right partner that we believed would help us execute on our vision – people that are passionate about small business lending and who felt the same thesis we did about the marketplace, about not being a direct lender.”
“That was more important than the economics of the deal, the amount, that kind of stuff.”
That preparation paid off for Lendio, who found themselves in the enviable position of being able to choose the best strategic partners from several term sheets in front of them.
Now that Brock Blake is a bit of an experienced hand at raising capital, he can share some best practices with entrepreneurs just beginning the process. Start with clarifying what is most important to you as an entrepreneur and look for partners who share your approach. Look beyond the money on the table, because you are going to be working with these people moving forward.
“What is the working relationship you going to have?” Mr. Blake asks.
“Can you work through challenges and issues?”
“What connections do they bring? What doors can they open?
“From a strategic perspective, can they add value to your business?”
“If you can establish that from the get go you’re going to have to pitch a lot of groups and get a feel for the types of investors out there before you can hone in on the type of investor you want.”
Now that Napier Park is on board, what role will they play with Lendio?
“Napier’s an active investor so we will play an active role on the board,” Mr. Kittredge explained. “We’ll have frequent communication with Brock around strategic alternatives, opportunities and challenges within the business.”
“On a board level we’ll meet in person at least once a quarter but I expect our conversations to be more regular with the exciting amount of activity going on with the company.”
Mr. Blake concurs, and looks forward to having access to an additional experienced perspective.
“From our standpoint that comes in the form regular board meetings in person on a regular basis but probably as valuable if not more valuable are the interactions on a regular time basis. When challenges are coming up the first group of individuals I want to call are Dan, Brian (Hirsch) and other people on our board. I’ll say ‘This is the challenge I am seeing – help me navigate through that. What are your thoughts, suggestions advice?'”
“I share the bad news even faster than the good news.”
As an active investor needing to maintain current knowledge of the alternative finance industry, what does Dan Kittredge pay attention to?
“We’re generally looking at industry trends,” Mr. Kittredge said. “We participate in conferences like Money 20/20 and we generally develop themes around where we think financial technology can be used to deliver better solutions. We focus less on public markets and more on generally what is going on in the industry.”
Do events like the Lending Club and OnDeck IPO’s have any effect on his thinking?
“It’s positive for the industry.,” Mr. Kittredge admitted. “It is generally good to see more capital flowing into the industry. We’re focused on findng our great business like Lendio. It gives us a goal to shoot for.”
You’ll notice how social the entire business growth process is, not just capital raising. How important are networking skills for a new entrepreneur?
“No question the more that you can establish relationships during times when you are not fundraising the better,” Mr. Blake advised. “Keep (potential) investors up to date. Get engaged in the market so they know who you are.”
“You’re usually going to get to a deal through a connection. Everyone we have that participated in this round came through a connection or someone we had already known prior to the round. The more you can establish those relationships early, and so that when you are going to talk to someone for the first time it is not going to raise money. The better position you are in to make that happen.”
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