Venture Leasing

In: Business and Management

Submitted By eydelya
Words 269
Pages 2

 Triple-Net Full Payout Leases
 Operating Leases
 Capital Leases
 Purchase Options

Traditional Leasing vs. Venture Leasing

 Venture leases structured to support start-ups

 Traditional leases often require a substantial deposit

 Traditional leases are often limited to a small subset of assets

 Venture leases are often a mix of debt and equity

 Hi-Tech Firms Have Large Equipment Needs

 Lowers a Firm's Equity Capital Needs

 Leasing Is a Low Cost Source of Capital –
Bank Loans Require Excess Collateral

 Lessor Has a Strong Claim in a Default

 New Firms Don't Need Equipment Tax Deductions, But Get Them with a Capital Lease

Venture Leasing Partnerships

 GP Compensation Similar to VC Fund

 Differ from VC Partnerships due to Timing of Cash
Flows and Nature of Investors

 Cash Flows Begin Quickly – Lowers Risk

 Non-Profits Are Taxed on Lease Payments
Received by Partnership – Unattractive

 Major Investors: Individuals, Insurance Cos. & Foreign Institutions

 Don't Take Board Seats

 Have Close Ties to VC Organizations

 Require Firm to Have Several Rounds of Prior
Funding Including VC Participation

 Rely on VC to Monitor and Advise Firm

 Repeated Dealings with VC Organization Reduces
Moral Hazard Risk for Venture Leasing Organization

Venture Lease Negotiations

 Size & Timing of Equipment Purchases

 Timing of Lease Payments – Takedown, Balloon
Payments & Security Deposits

 Length of Lease – Typically 3 or 4 Years

 Lease Pricing

 Promised Interest & Principal Payments

 Purchase Option Price

 Warrant Coverage – No. of Warrants x Exercise
Price Divided by Leasing Funds Advanced

 If Funds Are Not All Taken-Down, Lease Payments
Fall – Not Warrant Coverage


 Demand for Venture Leasing
 Venture Leasing…...

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