Startups: Don’t Trade Company Equity for Transistors
We recently came across a really interesting small business that was looking to lease computer equipment from us, for their startup. We didn’t win the deal; the customer instead decided to use investor capital (equity) to pay for computer equipment up-front.
Losing a deal is one thing, but this one really hurt, because the business has so much potential, and their investors are going to take more equity in the company in exchange for desktops and printers. That’s frustrating to see.
Please don’t do this, or if you are in the service/reseller channel, please don’t let your customers do this. It’s a terrible way to use investor dollars, and it’s especially bad for an entrepreneur.
This particular customer is building specialty kiosks for the hospitality industry. They will require desktops, monitors, and printers, 20 at a time, as they conduct their rollout.
They found UgradeUSA, as they were looking for a monthly payment and lower up-front capital expenses. From a financial standpoint it’s a lease, but we offer a generous early buyout option for every customer, so we’re much more fair than your average equipment lease – and we’ll work with startups and very small businesses. More than 80% of big businesses lease, because it helps with cash flow, moving one-time capital expenses into operating expenses. Most small businesses don’t lease because until now, the option hadn’t really existed before we came along.
We get all kinds of businesses applying to our program, from lawn mowing services to high-tech startups. Occasionally, we get a really interesting innovative company that we get excited about supporting. This was one of those cases. A new company that was coming out of a well-known tech incubator – and this company is computer hardware-intensive.
I have seen startups, some here in Austin, fail because they haven’t figured out how to get hardware to work as a monthly payment. Yes, devices are cheap, but a whole bunch of them together can really drain a startup’s capital.
Our message to the startup community is: please be smart and find creative ways to stretch your budgets! There are a lot of organizations that want to see small businesses succeed. UpgradeUSA is one of them. Meet us halfway, and we can help enable your – and your customers’ – success.