Case Study: Exponential Growth
How ClearThink Capital helped Applya capitalize on growth opportunities
~4 Minute Read
When ClearThink was first approached by Applya, the company was seeking access to capital partners in order to fund its continued growth, further development of the software platform, and restructuring of its balance sheet. Our role on growth capital engagements includes the following:
During our due diligence review, we discovered that one of the obstacles to Applya’s growth was the size, cost, and covenant structure of their existing credit line. The credit line was structured as a loan against accounts receivable, which, as most of Applya’s customers are state governments and large enterprises, are net 60 or net 90 terms. This made it difficult to put new business through the factoring line and made the cost of putting business through the line restrictive.
Through our network of alternative lenders, we were able to source a new accounts receivable line for Applya which had virtually no restrictive covenants and was 2.5x larger than their existing line. This gave Applya additional working capital while waiting for payment from their large accounts.
Pictured above: the cover page of Applya’s investor presentation we created
The next step for Applya was preparing for a growth capital raise. Preparation of this type requires us to ensure that all I’s are dotted and T’s are crossed. In our due diligence review, it became clear that employment and other relationships needed to be properly documented, management and employee incentive plans needed to be prepared and drafted, and organizational structure needed to be changed from a limited liability company structure to a corporate structure.
We drafted all of the required documentation, negotiated on behalf of Applya to the extent required, and worked with counsel to finalize the documentation.
Advising on a private growth capital raise requires conducting an analysis of the company’s capital structure, determining appropriate potential structures in light of the due diligence, and introducing the company to ClearThink relationships which could serve as the best capital partners. When we seek appropriate capital partners, our focus is not solely on the ability to provide capital, but on the personality, demeanor, time horizon, and interests of the parties. After speaking at length with numerous ClearThink relationships, particularly family offices, we introduced several to Applya.
After speaking with these relationships, Applya made the decision to engage with two family offices which provided the financing for the entire round. The financing was structured as a convertible note, with the option to convert into equity at the end of the term. We worked as Applya’s advisor throughout the process, finalized terms with the investors, and prepared all the documentation for the transaction.
As a result of both the credit line and growth capital, Applya was able to grow their business dramatically and was continuing that growth when the Covid-19 pandemic hit the United States. At that time, Applya found itself in a unique position. Due to their existing contracts with the states through the government purchasing organization, Applya was called upon to source crucial PPE (Personal Protective Equipment) for the states.
We assisted Applya by structuring a creative financing solution which rapidly made capital available in less than 30 days to finance purchases of PPE. As a result, Applya successfully added a new vertical to their business, which led to a dramatic increase in their 2020 revenue and substantial growth.
“It has been our pleasure and privilege to work with Applya. The Applya team is highly talented, driven, and professional, not only successfully navigating the many obstacles which often delay or derail growth of similar companies, but capitalizing on growth opportunities to become a highly profitable and successful company.”
– Bob Brown, Chief Executive Officer, ClearThink Capital LLC
We are always happy to discuss the funding and growth options available to a company. Please use the contact form below and a member of our team will be in touch shortly.
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