Venture leasing

Vehicule that allow start-up companies to finance certain equipment and infrastructure needs

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US United States
Web http://www.ltileasing.com/
Maturity

Mature

About the project Edit

Venture leasing is a creative vehicule that allow start-up companies to finance certain equipment and infrastructure needs. It describes equipment financing provided by equipment leasing firms to pre-profit, early stage companies. These startups, like most growing businesses, need computers, networking equipment, furniture, telephone equipment, and equipment for production and R&D. Venture leasing is a new way of financing equipment alternatively to traditional venture capital funding, which is less and less prone on taking risks in financing other assets than human talent.

The equipement leasing scheme comes into play to address the relatively high cost of venture capital versus venture leasing. 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.

In what ways is this project unique and creative? Edit

Venture leasing is an alternative way to fund start-up businesses that combines traditional leasing and venture capital.

What is the social value of this project? Edit

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. The equipment funded through venture leasing fund can also be pre-sold to brokers who commit to take back the equipment at the end of its lifecycle in order to resell it to other - less demanding - markets such as universities, other start-ups or emerging countries that need to have access to technologies at lower costs even if these technologies have already been used.

What is the potential of this project to expand and develop? Edit

Venture leasing can be applied to various industries including life sciences, software, telecommunications, information services, medical services and devices, and the Internet.

What was the triggering factor of this project? Edit

What is the business model of this project? Edit


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