In The Driver's Seat
Getting venture capital to jump-start his tech company was no big deal, says Rajiv Enand, CEO and co-founder of ServiceWare Inc. "They were calling us because we had done a good job of marketing our company," explains Enand, whose Oakmount, Pennsylvania, firm helps organizations create and maintain knowledge bases for customer service purposes. "Venture capitalists thrive on finding small companies in a hot space, and we got our name out by attending trade shows and getting our name in print."
Getting a bank loan, on the other hand, was a totally different story. "We went to PNC, and they politely laughed at our balance sheet," says Enand of the company's 1995, 1996 and 1997 treks to the bank for funding. "At the time, they didn't lend to high-tech companies. We had no real tangible net worth--nothing they could secure against assets; it was all intellectual property."
Two years and $1.5 million in venture capital later, the tide had changed. PNC, sprouting a new technology division, came looking for ServiceWare.
"We needed about $15 million, and if we had gotten $15 million in equity capital, it would have cost a large percentage of the company," says Enand. "Instead, we took $9 million in equity and got debt financing from PNC for the rest."
The difference this time? Venture backing. Enand says they actually had a choice between PNC and two leasing companies, Transamerica and Comdisco Ventures. "We got terms from all three and chose the most favorable," Enand says. "They even bid against each other. It's a very competitive market now--a buyer's market."
Enand's observation is true, but only if the buyer has the right backing. Those high-tech start-ups that capture venture capital and angel funding for the long haul can walk into a growing number of banks and expect to walk out with a loan in hand.