8/24/2023 0 Comments Structured finance definitionThey’re not renting cars, they’re selling them. In his introduction to startup financing, Julius gave the example of a car dealership. The value of these is very clear, and the bank will lend against these. For example, a company like Zalando might have a warehouse full of sweaters they intend to sell in December. And to be honest, the process I just described is not “pure” inventory financing as some would define it - it’s somewhere between asset-based and inventory.Ĭlassical inventory financing uses items you’re intending to sell - that’s what we normally think of as inventory. If you’ve read Veronika’s earlier article on asset-based financing, you’re probably noticing some similarities. Once we can’t rent products to subscribers anymore, we give them a new lease of life by selling them in the secondary market. At the end of the usage cycle, our devices don't have the same fate as many of the tech products that people buy in the traditional, linear fashion, which just end up in a drawer somewhere and then go to a landfill, or maybe get recycled. That’s a positive effect we’re very proud of. And every time one subscriber is done with their device, we refurbish it, repair it (if necessary), and then send it to the next subscriber. The average rental period is around nine to 10 months. And then every month, we revalue our portfolio. We have something similar to a Bloomberg terminal for resale values, so we know exactly what a specific model in a specific condition will be worth if we sold it today. Over time, we depreciate the asset and repay the loan from the rentals. Here’s a simplified example: We buy an iPhone for €100, and the bank will say "we’ll give you €85 of loan against that." This keeps the company protected if lenders come calling, and it also keeps things like profits with the company. They’re essentially separate legal entities which let us borrow from lenders against the residual value of the devices. In our case, we have special-purpose vehicles which belong to the Grover Group. You simply borrow money against the value of your inventory, almost like a mortgage. Inventory financing makes it possible for early-stage startups to take on relatively large quantities of debt before they turn profitable. You’d love to take a bank loan to ease the pressure, but banks are always a little hesitant because you’re not profitable and don’t have an established credit history. We can only grow if we have sufficient debt capital.Īs a startup, cash is always restricted. We buy the assets that we rent out to our customers, so we have them on our own balance sheet, or in a special purpose vehicle. We've now raised just over €300 million in equity and debt capital.īy nature of my role as CFO and the company’s business model, my focus is often on the fundraising side – both debt and equity. We have roughly 120 employees, including around 15 in the Finance Team. And since then I’ve been fortunate enough to grow the company with a very international, dedicated and smart team. I immediately fell in love with the idea of providing cool tech products to people in a more sustainable and more affordable way. With Grover’s model of refurbishing and recirculating devices, that amount can be brought down significantly. Globally, 52 million tons (that’s the weight of 350 Queen Elizabeth II cruise ships) worth of toxic e-waste are generated each year. We're also starting to work directly with the major consumer electronics brands to offer subscriptions for their devices, which is a very big, important topic, considering how wasteful the consumer electronics industry is currently set up to be. So you never have to worry about breaking your device. There's also insurance bundled into the service. And it’s a completely seamless, frictionless, worry-free process. On, you can rent everything from smartphones to laptops, to tablets and drones, to gaming and VR equipment for your business or yourself. We offer a simple monthly subscription for the best in tech. Grover is an affordable and sustainable form of access to the latest tech products - the products that people use to be more productive, more connected, and have fun. Image: Thomas Antonioli (left) and Michael Cassau. In 2017, I was introduced by a friend to Michael Cassau, founder of Grover. I joined a Fintech startup in Hamburg where we also used asset-backed debt and stayed there for 3 years, helping raise more than €300 million in equity and debt from investors like Paypal founder Peter Thiel, the IFC and Naspers. Over time I grew more excited about building companies myself rather than analyzing other companies, and, after finishing my MBA at INSEAD, made the move into the startup world. I worked on things like structured finance and mergers and acquisitions. I have a banking background: I worked in London for five years, doing investment banking.
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