|
|
| Information |
|
|
Venture Leasing: Startup Financing On the Rise
According to Pricewaterhouse Coopers, investment by institutional venture capitalists in startups grew from less than $3.0 billion at the beginning of the 1990's to over $106 billion in 2000. Although venture capital volume has retreated significantly since the economic "bubble" years of the late 1990's, the present volume of around $ 19 billion per year still represents a substantial rate of growth. Venture capitalists will fund more than 2,500 high growth startups in the U.S. this year. The growth in venture capital investing has given rise to a relatively new and expanding area of equipment leasing known as 'venture leasing'. Exactly what is venture leasing and what has fueled its growth since the early 1990's? Why has venture leasing become so attractive to venture capital-backed startups? To find answers, one must look at several important developments that have bolstered the growth of this important equipment leasing segment. The term venture leasing describes equipment financing provided by equipment leasing firms to pre-profit, early stage companies funded by venture capital investors. These startups, like most growing businesses, need computers, networking equipment, furniture, telephone equipment, and equipment for production and R&D. They rely on outside investor support until they prove their business models or achieve profitability. Fueling the growth in venture leasing is a combination of several factors, including: renewed economic expansion, improvement in the IPO market, abundant entrepreneurial talent, promising new technologies, and government policies favoring venture capital formation. In this environment, venture investors have formed a sizeable pool of venture capital to launch and support the development of many new technologies and business concepts. Additionally, an array of services is now available to support the development of startups and to promote their growth. CPA firms, banks, attorneys, investment banks, consultants, lessors, and even search firms have committed significant resources to this emerging market segment. Where does equipment leasing fit into the venture financing mix? The relatively high cost of venture capital versus venture leasing tells the story. Financing new ventures is a high risk proposition. To compensate venture capitalists for this risk, they generally require a sizeable equity stake in the companies they finance. They typically seek investment returns of at least 35% on their investments over five to seven years. Their return is achieved via an IPO or other sale of their equity stake. In comparison, venture lessors seek a return in the 15% - 22% range. These transactions amortize in two to four years and are secured by the underlying equipment. Although the risk to venture lessors is also high, venture lessors mitigate the risk by having a security interest in the leased equipment and structuring transactions that amortize. Appreciating the obvious cost advantage of venture leasing over venture capital, startup companies have turned to venture leasing as a significant source of funding to support their growth. Additional advantages to the startup of venture leasing include the traditional leasing strong points --- conservation of cash for working capital, management of cash flow, flexibility, and serving as a supplement to other available capital. What makes a 'good' venture lease transaction? Venture lessors look at several factors. Two of the main ingredients of a successful new venture are the caliber of its management team and the quality of its venture capital sponsors. In many cases the two groups seem to find one another. A good management team has usually demonstrated prior successes in the field in which the new venture is active. Additionally, they must have experience in the key business functions-sales, marketing, R&D, production, engineering, and finance. Although there are many venture capitalists financing new ventures, there can be a significant difference in their abilities, staying power, and resources. The better venture capitalists have successful track records and direct experience with the type of companies they financed. The best VCs have industry specialization and many are staffed by individuals with direct operating experience within the industries they finance. The amount of capital a venture capitalist allocates to the startup for future rounds is also important. An otherwise good VC group that has exhausted its allocated funding can be problematic. After determining that the caliber of the management team and venture capitalists is high, a venture lessor looks at the startup's business model and market potential. It is unrealistic to expect expert evaluation of the technology, market, business model and competitive climate by equipment leasing firms. Many leasing firms rely on experienced and reputable venture capitalists who have evaluated these factors during their 'due diligence' process. However, the lessor must still undertake significant independent evaluation. During this evaluation he considers questions such as: Does the business plan make sense? Is the product/ service necessary, who is the targeted customer and how large is the potential market? How are products and services priced and what are the projected revenues? What are the production costs and what are the other projected expenses? Do these projections seem reasonable? How much cash is on hand and how long will it last the startup according to the projections? When will the startup need the next equity round? These, and questions like these, help the lessor determine whether the business plan and model are reasonable The most basic credit question facing the leasing company considering leasing equipment to a startup is whether there is sufficient cash on hand to support the startup through a significant part of the lease term. If no more venture capital is raised and the venture runs out of cash, the lessor is not likely to collect lease payments. To mitigate this risk, most experienced venture lessors require that the startup have at least nine months or more of cash on hand before proceeding. Usually, startups approved by venture lessors have raised $ 5 million or more in venture capital and have not yet exhausted a healthy portion of this amount. Where do startups turn to get their leases funded? Part of the infrastructure supporting venture startups is a handful of national leasing companies that specialize in venture lease transactions. These firms have experience in structuring, pricing and documenting transactions, performing due diligence, and working with startup companies through their ups and downs. The better venture lessors respond quickly to lease proposal requests, expedite the credit review process, and work closely with startups to get documents executed and the equipment ordered. Most venture lessors provide leases to startups under lines of credit so that the lessee can schedule multiple takedowns during the year. These lease lines typically range from as little as $200,000 to over $ 5,000,000, depending on the start-up's need, projected growth and the level of venture capital support. The better venture lease providers also assist customers, directly or indirectly, in identifying other resources to support their growth. They help the startup acquire equipment at better prices, arrange takeouts of existing equipment, find additional working capital funding, locate temporary CFO's, and provide introductions to potential strategic partners--- these are all value-added services the best venture lessors bring to the table. What is the outlook for venture leasing? Venture leasing has really come into its own since the early 1990s. With venture investors pouring tens of billion of dollars into startups annually, this market segment has evolved into an attractive one for the equipment leasing industry. The most attractive industries for venture leasing include life sciences, software, telecommunications, information services, medical services and devices, and the Internet. As long as the factors supporting the formation of startups remain favorable, the outlook for venture leasing continues to look promising. George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. ("LTI"), responsible for LTI's marketing and financing efforts. A co-founder of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing. Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at: http://www.ltileasing.com.
Latest News:Site: Yahoo! News Search Results for news Myanmar's Suu Kyi to get family letters, news mags (Reuters via Yahoo! News) Detained Myanmar opposition leader Aung San Suu Kyi has managed to wring small concessions from the ruling generals in the form of letters from her family and some international news magazines, her lawyer said on Friday. SEC Looks Into UAL Stock Scare; Implications For Online News? (CBS News) A ton of digits have been devoted to this in other spots but the SEC's decision to investigate takes it to another level. The backstory: a six-year-old news story about UAL declaring bankruptcy made it into the Tribune-owned Sun-Sentinel 's current news flow, was picked up by a Google (NSDQ: GOOG) News bot and, via a reporter for a newsletter, made it onto Bloomberg News. After a lot of buck ... JCDecaux in talks for News Outdoor Group in Russia (AP via Yahoo! News) French outdoor advertising firm JCDecaux SA said Thursday it is negotiating to buy Russian rival News Outdoor Group from global media company News Corp. JCDecaux and News Corp. in talks to combine outdoor ad groups (International Herald Tribune) The News Corp. chief executive, Rupert Murdoch, has recently expressed nervousness about investments in Russia, where News Outdoor generated the bulk of its revenue last year. News Corp tightens grip on Premiere with new CEO (Reuters via Yahoo! News) Rupert Murdoch tightened his grip on German pay-TV broadcaster Premiere by appointing News Corp executive Mark Williams as CEO in a move to get the company back on track. SEC Looks Into UAL Stock Scare; Implications For Online News? (paidContent.org via Yahoo! Finance) A ton of digits have been devoted to this in other spots but the SEC's decision to investigate takes it to another level. The backstory: a six-year-old news story about UAL declaring bankruptcy made it into the Tribune-owned Sun-Sentinel's current news flow, was picked up by a Google News bot and, via a reporter for a newsletter, made it onto Bloomberg News. Phila. mayor to announce grim budget news (The Philadelphia Inquirer) The Nutter administration is expected to announce grim budget news today, which is all but certain to lead to significant spending cuts - perhaps as high as 10 percent - in some city departments, according to three sources familiar with the budget. DIVA TALK: Chatting with In the Heights ' Mandy Gonzalez Plus News of Fraser, Testa and Bundy (Playbill) News, views and reviews about the multi-talented women of the musical theatre and the concert/cabaret stage. Help News pick Stadium's greatest moment (New York Daily News) The News is marking the countdown to the final game at The House That Ruth Built by reflecting on Yankee Stadium's greatest moments - and we're asking you - the reader - to help us pick out the best of the best. JCDecaux in talks to buy News Corp. billboard unit (AP via Yahoo! Finance) In a deal that would create the world's largest outdoor advertising company, French conglomerate JCDecaux SA said Thursday that it is in talks to buy Russian rival News Outdoor Group from global media company News Corp. Site: news - Google News Fidelity to Roll out New Home Page Providing Real-Time Financial ... - MarketWatch
MORE RESOURCES: Site: Yahoo! News Search Results for leases leasing Profile: NALP of Year Winner Feldman Says, 'Leasing Is about People, not Property' (Multi-Housing News) Thomas Feldman is the proud recipient of the 2008 National Apartment Leasing Professional (NALP) of the Year title from the National Apartment Association Education Institute (NAAEI). Feldman leases apartments at 100 Memorial Drive, a 260-unit building in Cambridge, Mass. He believes, "You really need to make the experience of a site visit more than just a live 'virtual tour.' Gas Leasing Rights (WENY-TV) ALBANY--New York Attorney General Andrew Cuomo is warning landowner's to be careful when they enter into oil and gas leases. Cuomo wants landowners to know their rights. The Attorney General's office is investigating a significant number of complaints. Farmland leasing program Sept. 11 (The Journal-Standard) Landowners looking for information about farm leasing and farm management are invited to a Farmland Leasing Program from 9 to 11 a.m. Thursday, Sept. 11, at the Stephenson County Farm Bureau building, 210 W. Spring St. Cuomo to landowners: Know your rights (The Post-Standard) New York State Attorney General Andrew Cuomo is alerting landowners to know their rights and to beware of "strong-arm tactics" before leasing property to gas exploration companies that are prospecting various counties in the state, including Madison. DNC leases Aspen buses (Vail Daily) ASPEN, Colorado ? The Roaring Fork Transportation Authority will never be accused of throwing Barack Obama under the bus. Vintage Park Developers on leasing: We?re on schedule (Cypress Sun) With ?For Lease? signs posted over many of the store front windows, right now Vintage Park may look like a ghost town. But that?s expected to change. INDECISION '08: Tenant Hesitation Hinders Leasing of New Projects (CoStar Group) Call it the "deer in the headlights" effect. Caught in the glare of bad economic news, mixed-signals about the direction of the economy and an imminent change in administrations, many business tenants are opting to stay in a holding pattern and renew... State oil and gas leases sold (Bozeman Daily Chronicle) Oil and gas tracts under and along the Yellowstone and Boulder rivers that caused concern among conservation groups this summer sold for a pretty penny this week at the state?s regular oil and gas lease sale. Carl Pope: A Very 21st-Century Scandal (HuffingtonPost) Denver -- Reporters periodically ask me for good story leads. For five years I've been urging them to dig into the oil and gas leasing... Sex, drugs and . . . offshore oil drilling (Louisville Courier-Journal) An Interior Department investigation found a "culture of substance abuse and promiscuity" by workers at the federal agency that issues offshore drilling leases and collects royalties. Site: leases leasing - Google News National parks marginally escape Bush?s last-minute leasing program - Examiner.com
|
|
|
|
RELATED ARTICLES
Explore An Effective Revolutionary Approach To Traditional Business Financing For business owners who need working capital now there is a revolutionary, tax-deductible cash flow solution that frees up capital and gives them the money they need to grow. This diversified cash flow solutions is known as "asset leasing. Basic Things You Should Know About A Lease Purchase Contract What exactly is a contract?By definition, a contract is an agreement between two or more parties to do, or to refrain from doing, a particular thing in exchange for something valuable. The parties can be individuals, businesses, organizations and government agencies. Venture Leasing: Startup Financing On the Rise According to Pricewaterhouse Coopers, investment by institutional venture capitalists in startups grew from less than $3.0 billion at the beginning of the 1990's to over $106 billion in 2000. Insiders Guide to Snaring the Best Lease Deal Every year, thousands of business owners and financial managers are faced with the task of obtaining attractive financing for equipment their firms want to acquire. Snaring the best leasing arrangement requires only a bit of planning and a smidgeon of finesse. The Leverage of the Lease In today's rapidly changing business environment it makes sense to consider all the options before paying for your business equipment - whether it's a photocopier, computer system, computer hardware or software, telephone system, security equipment, office furniture or anything else. Many business people will give great consideration to the actual purchase, getting quotes from different suppliers and considering different choices. Equipment Leasing Blunders That Can Cost Your Firm a Mint Rod McHenry, the financial vice president of a document imaging company, thought he had great cause for celebrating. He had signed an unbelievable $370,000 lease proposal covering computer servers, workstations, software and other networking equipment. Venture Leasing - A Smarter Way To Build Enterprise Value In 2003, venture capitalists and investors dispensed over $18 billion to promising young U.S. So You Want to be a Landlord? The residual income from owning rental properties may bring more money into your life than the fast flip in the long term. If nothing else, the stress is reduced because a well-chosen investment will pay for itself until you the market is ready for you to sell. Pricing Your Apartments How do you fix a price point for an apartment? Take a guess? Figure it based on your carrying costs? Check comps and do a market analysis? Charge whatever the market will bear? If you're looking to place quality tenants, less is sometimes more.We all want to make money with income property; the more the better! When you're looking for a new tenant, however, don't assume that you're going to make more money by charging more. True Tenant Tales, Volume One Working with tenants can be an amazing experience. (Owners and contractors are equally astounding, but those are subjects for another day. Smart Car Leasing for Beginners Car leasing is extremely popular because it provides an attractive method of driving an automobile that you might not otherwise afford. It allows you to make lower monthly payments than with traditional car purchase loans. What Happens When the Anchor Tenant Moves and You Are On a Ten-year Lease? Recently there was an article in the Houston Business Journal of the anchor store in many shopping centers through out Houston pulling out. Kmart, took out some stores, so did three other big box stores and a few consumer electronics places and larger furniture stores, now Albertson's has left. Ten Equipment Leasing Tips - Save a Bundle on Your Next Lease According to the Equipment Leasing Association ("ELA"), U.S. Leases And Tenants - The Spooky Tenant You, Mr. Landlord are pleased to find qualified tenants for your rental house. Lease Contracts - The Meaning of Joint and Several When you see the phrase "joint and several" in alegal document or contract it means that that the partieson one side of the agreement are responsible individuallyand collectively for the terms of the agreement.Example: In the case of two tenants signing a lease agreement,"joint" means they are jointly responsible for the rent. What to Consider Before Leasing a Car Some people choose to lease a car rather than buying one outright. Here are some useful tips on what to consider before leasing a car:The most important thing to remember is that you do not own the vehicle. Getting Your Venture Lease Approved Each year venture capitalists fund more than 2,500 start-up companies in the U.S. Warning - This Lease Might Explode Any Minute Mike Caringi, owner of a small New Jersey business that sells pumps, found himself facing a gut-wrenching dilemma last summer. Should he continue paying $ 1,500 each month for essential telecommunications services he no longer receives and for leased equipment he claims was never installed? Or, should he stop making payments and face a potential lawsuit from the firm that financed the equipment under a 'hell or high water' lease? Mr. The Lease And Purchase Option If you have an investment property, should you rent it or sell it? The answer to that question is that you should do both. If you have lots of time on your hands and are handy with tools, you can choose to rent out your property. Ten Ways to Save a Bundle on Your Next Lease According to the Equipment Leasing Association ("ELA"), U.S.
|
| Home | Site Map | Resource Links |
