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The Benefits of Venture Leasing for Hardware Startups

Introduction

Global funding for startups has decreased, with robotics startups facing difficulties in securing funding even in the wake of investment. Founders of robotics startups and other equipment-heavy businesses are left wondering whether they’ll be able to close their next funding round or if they’ll have to resort to acquisition. In light of this, hardware startups can consider venture leasing as a suitable financing option.

Why is Venture Leasing Suitable for Hardware Startups?

Hardware companies require intensive research and development (R&D), capital expenditures (CapEx), and manual labor to manufacture their products, making their cash burn rate more than two and a half times higher than SaaS companies.

Hardware startups are constantly trying to avoid dilution when raising funds due to their capital-heavy operations. Therefore, venture leasing can be a relief for founders as it gives them the money they need up front without compromising their company’s equity. These deals work by taking the business’ physical assets as a liability to secure the loan. This makes it easier for startups to obtain it, contributing to the company keeping 100% of their ownership.

How Does Venture Leasing Work?

Venture leasing works like a car lease, where the leased asset could be equipment, real estate, or even intellectual property. A startup receives these assets in return for a monthly lease payment over a fixed term, typically shorter than traditional financing. The lender is often more flexible with their agreement terms than other funders and allows the company to operate equipment as they see fit. With venture leasing, leasing theoretically takes a company’s equipment from its capital assets, allowing for more efficient margins in terms of profitability.

How Can Venture Leasing Benefit Startup Equipment-As-A-Service Businesses?

With venture leasing, a startup can lease assets such as equipment, real estate or even intellectual property from a specialized leasing company. This also presents a worthy option for equipment-as-a-service startups. They can receive the assets they need in return for a monthly lease payment over a fixed, typically shorter term than traditional financing. Leasing the required equipment theoretically takes that company’s equipment from its capital assets, resulting in more efficient margins and profitability.

Conclusion

In conclusion, dealing with uncertainty, e.g., reduced funding rounds, can be challenging for robotics startups and equipment-heavy businesses. However, venture leasing presents a suitable option for these hardware companies to meet their financing needs and keep their equity while operating more efficiently. If entrepreneurs are seeking to expand their business operations and gain access to needed equipment, they should consider venture leasing as an alternative financing option.

FAQ

What is venture leasing?

Venture leasing is a type of financing deal that startups (particularly hardware startups) use to finance their businesses. Unlike other funding options, venture leasing does not demand company equity, instead taking the business’ physical assets as a liability to secure the loan. Equipment as a lease can also boost profits.

Do startups keep 100% ownership with venture leasing?

Yes, venture leasing allows startups to keep 100% of their ownership.

What are the benefits of venture leasing for equipment-heavy businesses?

Hardware companies require intensive research and development (R&D), capital expenditures (CapEx), and manual labor to manufacture their products, making their cash burn rate more than two and a half times higher than SaaS companies, making traditional financing less attractive. Venture leasing allows startups to obtain the financing they need while keeping 100% ownership.

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