Situation: A company has been looking at alternatives for expansion but would be willing to stay in their present site if the landlord is willing to lower their rent without requiring more time on the current lease. Another option would be to purchase a building and lease out extra space until they need to expand. The CEO seeks advice on how to move forward. Do you more or negotiate a lower rent?
Advice from the CEOs:
Much has to do with the current real estate market. If the market is slack, there are more options whether the decision is to move or renegotiate the rent with the current landlord. However, if demand for space is high then landlords and sellers have the upper hand. This is a classic demand-supply situation.
Investigate lease buy-out options if the decision is to move. Better yet, if the decision is to move ask the new landlord to pay off the old lease.
For the money required to move an operation of substantial size, why not buy? In this case, the decision is balancing the size of the down payment with the company’s current cash position.
If the decision is to buy, consider creating an LLC to purchase the property and fund the purchase through a Small Business Administration loan.
The Devil’s Advocate Perspective while you make the decision: don’t worry about the least until it runs out. Instead focus on making as much money as possible and prepare for a move closer to the end of the lease. Renegotiating a lease and looking for a building at this time can consume a lot of time.
Interview with Sandy Lawrence, Past CEO, Therative, Inc.
Situation: The technology sector is growing following a couple of lean years. Whether you want to fund a new company, or a new effort within a smaller company, what are the best avenues to capital? How has the game changed?
Funding and credit markets are opening but still tight. The bar has been raised because too many people are chasing too few available dollars.
The venture capital sector has consolidated. Over 80% of current focus is on technology, software and medical. Under 20% goes to the consumer sector.
It is important to target VCs who specialize in your technology, market and business model.
Research current VC portfolios.
Angels now act more like VCs – particularly structured angel groups.
Initial investments are typically under $1 million.
If you have a technology, investigate the grant world – e.g., NIH or DARPA. These organizations fund research, but not marketing, etc.
Look for specific programs or RFPs that align with your technology.
Target your grant request toward prototype development and studies.
Search LinkedIn for military people who can introduce you to contacts within programs like DARPA.
Investigate SBA Grants, and foundations with an interest in your technology or application.
Foundations sometimes will grant funds ($100k) to support the work of individual scientists and researchers.
Call on friends and family who believe in you and your work.
Whoever you approach, these rules apply:
Do your homework. Choose sources that align with your project and profile.
Presentations must be crisp and easily understood. Investing in professional assistance is wise.
Be able to make your case in 15 minutes or less. The first minutes are most crucial, so have your ‘elevator’ pitch perfected.
Your model and financials must support a high multiple exit, 5-10x their investment in a reasonable period of time (~5 years).
Team, Team, Team – credentials, experience, presentation – be a team with whom the investor can work.