Getting Your Venture Lease Approved

Each year venture capitalists fund more than 2,500 start-up companies in the U.S. Many of these companies try to conserve their equity capital by approaching venture-leasing firms to secure equipment financing. By obtaining lease financing, these savvy firms are able to use their equity capital for high-impact activities like recruiting key personnel, product development, and expanding their marketing efforts.

What are the qualities that make some start-ups more attractive than others to venture lessors? Here are ten factors that most venture lessors evaluate to decide which start-ups to finance:

Caliber of the Management Team

Most venture lessors consider the start-ups management team to be the most critical success factor for the venture. Though it can be challenging to quickly evaluate management talent, there are several qualities that venture lessors consider. They look for experienced managers with high integrity and a proven history of business performance.

Quality of the Venture Capital Sponsors

Another important factor for most venture lessors is the quality of the start-ups venture capital sponsors. Venture lessors look for experienced venture capitalists with successful investment performance over a number of years. The venture capitalists should also have good reputations for dealing fairly with creditors serving their portfolio companies. Before entering new lease arrangements, most venture lessors verify that the start-ups venture capital sponsors are actively supporting them.

Soundness of the Business Plan

Successful start-ups usually have compelling, well-articulated business plans. Lessors look for signs that the start-ups have promising market opportunities, clear and credible projections, and reliable financial statements.

Cash Position /Monthly Burn Rate

A yardstick used by many venture lessors to measure risk is the start-ups projected cash consumption rate. The ratio of available cash to the start-ups monthly burn rate is a useful measure. It crudely determines how long the start-up can last before a new equity round is needed. The lessor views a transaction as less risky if the start-up can make full payments during a significant portion of the lease term without raising additional equity. Most lessors look for a ratio that supports at least 9 12 months of the start-ups operation.

Equipment Quality

The quality and intended use of the equipment is an important factor for most venture lessors. Most lessors look for transactions involving equipment that is essential to the start-ups operation. Additionally, the equipment should have acceptable collateral value and be readily re-marketable in the equipment aftermarket.

Product Prospects and Revenue Track Record

If the start-up is in the development stage and has yet to sell products, venture lessors generally look for products capable of establishing a strong market position. If the start-ups product is already in distribution, lessors look for strong monthly or quarterly revenue growth. A poor reception of the product in the early stages, when measured against the business plan, can often signal a faulty product launch or faulty product concept.

Valuation History

A valuation history records the share prices of stock sold to investors by the start-up. Unless there is a good explanation, most lessors look for significant share price appreciation over successive offering rounds. The assumption is that the start-up is making steady and significant progress in its development, which will be reflected in rising share values.

Balance Sheet Strength

Venture lessors usually evaluate a start-ups working capital to ensure that the start-up can make payments when due. Along with an analysis of the start-ups burn rate, lessors use traditional working capital measures like the current and quick ratios. Lessors also look for other signs of balance sheet strength, such as: low to moderate leverage; positive tangible net worth (inclusive of subordinated debt); and minimum paid-in capital of $7 - $10 million.

Outside Professional Involvement

Most venture lessors view the involvement of reputable and successful outside board members as a positive factor for start-ups. A reputable CPA firm, law firm, institutional partners and/or service providers are also viewed by lessors as positive. These professionals can bring valuable expertise and contacts that can help the new venture to succeed.

Payment Performance

As with more traditional lessees, venture-leasing companies frown upon poor lessee payment histories. Most venture lessors expect lessees to have satisfactory payment histories, unless good explanations can be offered. Like other vendors, satisfactory payment of bills by customers is where the rubber meets the road. Whether the lessee is a start-up or a Fortune 500 company, most lessors view prompt payment as sacrosanct.

While venture lessors use additional factors to make their credit decisions, these ten factors seem to be used universally. Though most of these factors are subjective, they have stood the test of time for venture lessors in making informed and reasonable credit decisions.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. (LTI), responsible for LTIs 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.

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Coffee Drink Basics

When you enter a coffee house, you have a multitude of drink choices like latt, cappuccino, straight shot and caff mocha just to name a few.

Sometimes knowing what to order can be overwhelming unless you know what you are getting. After all, who wants to pay an outrageous amount of money for a mystery drink that you may not even like?

So we come to the rescue, and after you read this, you'll have a basic understanding of how the most popular coffee drinks are made and what they are made of.

Most coffee drinks start with espresso and espresso is just coffee that is brewed a certain way. It is finely ground to almost a powder then very hot water is forced through the grounds under intense pressure.

The brewing process is timed so that the flavorful and aromatic oils are extracted from the coffee and not the bitter components. This produces a strong flavored, but not bitter, concentrated shot of coffee.

Straight Shot

The straight shot refers to espresso coffee and the secret to good espresso is the extraction time, volume, and golden crema which is a thick light brown layer of frothed coffee oils that float on top of a properly extracted espresso.

The short shot or ristretto is extracted to a volume of three-quarters of an ounce. The shorter restricted pour magnifies the essence of the coffee and the chance of any bitter elements being extracted is minimized. If you have ever ordered an espresso shot in Europe they usually serve the ristretto.

The long shot or lungo is extracted to a volume of one and one-half ounces.

The double shot is a 2 ounce shot using twice as much coffee in the portafilter.

The correct way to serve a straight shot is to extract it directly into a warmed demitasse cup. The warm demitasse cup will keep the straight shot warm and prolong the crema. A straight shot is best enjoyed immediately after brewing.

It is rare to see people drinking straight shots of espresso in the US. Most people here drink variations using steamed milk mixed with the shots to make the different coffee drinks listed here.

Espresso Macchiato

The Espresso Macchiato starts with a shot of espresso and then a small amount of foamed milk is spooned over the shot. Macchiato in Italian means "marked," as the espresso is marked with foam.

Espresso Con Panna

This is an Espresso Macchiato using whipped cream in place of the foamed milk. The drink gets its name Con Panna which means "with cream."

Caff Americano

The Caff Americano is a drink similar to American brewed coffee. It is made with a single or double shot of espresso combined with 6 to 8 ounces of hot water out of an espresso machine. The result is a very smooth cup of coffee that is much hotter than brewed coffee.

Cappuccino

Cappuccino is made with a fluffy, wet foam, mixed with espresso coffee upon the pour to create a blend of the two flavors. Cold milk is essential, as is expertise in the foaming process. Cappuccino has a large volume of foam making it a light weight drink and less filling.

Caff Latt

Caff Latt is similar to the cappuccino but with much less foam and more steamed milk. A latt is made by holding back the foam with a spoon while pouring the frothed milk from the steaming pitcher. The caff latt is completed by being topped with a small amount of the held back foam.

Caff latt gets its name from the addition of coffee to milk. For an iced latt, cold milk is combined with the espresso and then the ice is added.

Caff Mocha

A caff mocha is made by adding powdered or chocolate syrup to a hot shot of espresso and blended. Steamed milk is then be added to the espresso-chocolate mixture and usually it is topped with whipped cream.

Iced mochas are made with cold milk and the ice added after the coffee and chocolate have been blended.

Flavored Coffee Drinks

Some popular coffee flavors are: vanilla, Irish creme, almond, hazelnut, caramel and fruit flavors such as orange and raspberry. These drinks usually start with a flavored syrup that is mixed with hot espresso and stirred. Then steamed milk is stirred in like in a latt.

An iced version of these flavored coffees made with cold milk instead of steamed makes a delicious cold drink in the summer months.

So now that you know what's in the basic coffee drinks, try one you haven't tasted yet. Who knows, you might find a new favorite.

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