This week on NVTC’s blog, Alex Castelli, CPA, is partner and Technology and Life Sciences Industry Practice Leader at NVTC member company CohnReznick, explains how crowdfunding has become such an attractive financing vehicle for technology companies.


7K0A0597[1]The technology industry stands out as a major beneficiary of this promising method of capital raising. In 2014, technology was a leading sector in terms of capital commitments – at around $98.5 million – and led the number of raises that have been offered since inception, according to Crowdnetic’s Quarterly Private Companies Publicly Raising Data Analysis.2 Capital commitments in the technology industry trailed only behind the services industry.

So why has crowdfunding become such an attractive financing vehicle for technology companies? And what is required to launch a successful crowdfunding campaign?

Proving legitimacy and demand

Obtaining financing from traditional lenders such as banks, angel investors, and venture capital firms can be difficult for some early-stage technology companies. Crowdfunding offers an additional source for raising capital. Many investors are eager to support innovative ideas or services, and the growing legitimacy among accredited investors to provide financial backing through the internet has contributed to the popularity of crowdfunding. For tech startups, crowdfunding is an effective way to demonstrate to lenders the demand for a product or service and also to justify the company’s financial projections. Technology companies that have successfully secured accredited investors via the web are especially attractive to traditional lenders as their ideas have reached a level of legitimacy and approval.

Testing the markets and building brand awareness

In addition to raising capital, crowdfunding provides a platform for technology entrepreneurs to test the success of their product or service once it is officially on the market. Through this process, an entrepreneur can determine whether to continue investing time and money in a particular product or service based on feedback from potential customers. Doing so avoids involvement in a venture that may ultimately prove to be futile. The exposure of a product or service through crowdfunding offers the ability to build brand awareness and develop a loyal community of customers right from the start. Developing a loyal following can generate word-of-mouth advertising that can boost a startup business to success.

Finding success

There is a commonality among crowdfunding success stories. Deals receiving funding typically have outside sponsors who advocate on behalf of the deal. These are usually prominent investors who are willing to put their names on the deal and endorse them personally. This signals to other investors that it is a quality opportunity. “This is not so different from the way investments have always been done,” said Steven Dresner, CEO of Dealflow. “In the past, one prominent venture capitalist would put a million dollars in a deal, and then the startup could use that as leverage to attract more VC money. Now it is just taking place in a whole new forum.”

What does the future of crowdfunding hold?

Notwithstanding its popularity within the technology industry, to date, equity crowdfunding may be best characterized as a “growing” source of capital formation available to private companies. Entrepreneurs continue to test the market in determining how best to utilize crowdfunding as an alternative strategy for obtaining financing, gaining exposure, validating their products or services, and ultimately, expanding their businesses. The influence of crowdfunding on the middle market sector has yet to be fully realized. However, crowdfunding is on track to not only transform how privately held companies raise capital and interact with investors, but to also influence how businesses formulate and implement their go-to-market strategies.

1 https://www.fundable.com/infographics/economic-value-crowdfunding
2 http://www.crowdnetic.com/reports/jan-2015-report


Alex Castelli, CPA, is a partner and CohnReznick’s Technology and Life Sciences Industry Practice Leader. He can be contacted at 703-744-6708 or alex.castelli@cohnreznick.com. To learn more about CohnReznick’s Technology Industry Practice, visit the company’s webpage and follow CohnReznick on Twitter @CR_TechInd.

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This week on NVTC’s blog, Ryan Miller of NVTC member company CBRE highlights CBRE’s in-depth analysis of the Country’s Top 50 Markets for tech talent, “Scoring Tech Talent,” and what it means for companies regionally and nationally as strategic decisions are made on how and where to grow. 


Technological advancements continue to overwrite the previous file for how to operate in our personal and professional lives.  To keep up with the rapid pace of change today, companies spanning the spectrum of all industries are making investments to insure that their people, processes and products align with these advancements in an effort to establish and maintain a competitive advantage.

These investments start with “people,” as all innovation emanates from human  creativity, knowledge and expertise.  Accordingly, companies will make a concerted effort to expand in markets where there is the highest concentration of tech talent, and do so in a fashion that caters to the needs and aspirations of the workforce.  Understanding those demographics and the underlying fundamentals of where the tech talent clusters are located – such as market rents, labor costs, infrastructure and cost of living – allows for the development of much more informed hiring, acquisition and overall capital investment and deployment strategies.

In order to more fully understand the fundamentals of the top tech talent markets, CBRE performed a detailed study of metropolitan areas throughout  the United States and has answered some key  questions about tech talent, such as:  What is tech talent?  What do tech talent markets look like?  Why does tech talent cluster?  How does tech talent impact commercial real estate?  The end result is a comprehensive report that lists the top 50 markets throughout the U.S. based upon a multi-dimensional index and provides companies with information to make informed real estate decisions.

The following provides a glimpse into the characteristics that define the components of a top tech talent market:

  • A high degree of education attainment:  nearly 75% of the top 50 markets have an education attainment rate greater than the U.S. average
  • The abundance of Millennials:  those markets with the greatest concentration of millennials and millennial growth.
  • Tech Talent Clustering:  firms located in tech talent clusters have a greater labor pool and benefit from the inherent knowledge transfer within those markets.  This leads to more collaboration, sharing of resources and – in turn – innovation.

TechTalentLaborBreakdown-Large&SmallMarkets2

The connection between tech market characteristics and a company’s real estate strategy is significant.  Specific submarkets, or even specific areas of submarkets, might be significantly more desirable and drive rental rates considerably higher than comparable buildings in the same general area.  This dynamic, combined with labor costs, provides a meaningful perspective into a company’s potential expenses in a top tech talent market.

For example, in the Northern Virginia market, the tech talent has clustered in the Dulles Corridor, and specifically in the Reston Town Center, due to the abundance of amenities, proximity to densely developed housing, a well-designed transportation infrastructure and the existence of other large companies with a significant focus on technology.  Accordingly, rental rates in this subset of the market are markedly higher than comparable buildings that sit just outside of the Reston Town Center boundary.

Building a real estate strategy around tech talent hot spots could prove very successful for companies desiring to attract and retain the best talent that the country has to offer.  With the proper analysis, guidance and diligence, the opportunity to create a distinct competitive advantage could be just around the corner.

To read the comprehensive report, please click here.


Ryan Miller is a member of the CBRE’s Occupier Advisory and Transaction Services Group in the McLean, VA office, where he and his team introduce best-in-class resources and processes to support their clients’ corporate objectives through customized real estate strategies, both regionally and nationally.  Ryan can be contacted at ryan.miller@cbre.com, and you can learn more about the company at:  www.cbre.com .

 

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The best relationships are built on great communication and mutual understanding – which is why the relationship between federal CIOs and the applications that drive their agencies’ performance is getting more complicated. This week on NVTC’s blog, Davis Johnson, the vice president of public sector at NVTC member company Riverbed Technology explains why it’s important to improve your network visibility.


The best relationships are built on great communication and mutual understanding – which is why the relationship between federal CIOs and the applications that drive their agencies’ performance is getting more complicated.Federal leaders are too often in the dark about which applications are delivering value, which personnel are using them, and how those applications are performing. Agencies simply don’t know their apps very well, and understanding applications begins with gaining visibility into the networks they run on.

The network visibility crisis is getting even more serious as agencies move to the cloud and consolidate data centers. The result is that applications are traveling farther distances across agency networks to reach defense and civilian workers that rely on them every day. Agencies need to make sure they have visibility into the new network paths, and roadblocks, that their applications navigate, or face negative impacts to performance and budgets.

In a Riverbed-commissioned survey conducted by Market Connections, over 50 percent of Federal IT respondents reported that it takes a day or more to detect and fix application performance issues. Furthermore, only 17 percent reported being able to address and fix the issue within minutes.

The costs associated with network outages can be staggering. Today, the average cost of an enterprise application failure is $500,000 to $1 million per hour. This is why it is so important to have good network visibility to identify and fix network and performance application problems as they occur.

Many federal IT executives lack the manpower, budget and tools necessary to find and fix performance issues quickly and efficiently. Without the right tools to monitor network and application performance, federal IT professionals cannot pinpoint problems that directly lessen agency or mission effectiveness. This can mean supply chain delays of materiel to warfighters in the field or lack of access to critical defense and global security applications.

Networks need to perform quickly and seamlessly in order to fulfill mission requirements. Performance monitoring tools provide the broadest, most comprehensive view into network activity, helping to ensure fast performance, high security and rapid recovery.

With visibility across the entire network and its applications, IT departments can identify and fix problems in minutes—before end users notice, and before productivity and citizen services suffer. More than two-thirds (68%) of respondents see improved network reliability as a key value of monitoring tools and more than three-quarters (77%) of respondents said automated investigation and diagnosis is an important feature in a network monitoring solution.

Survey respondents shared which features are important in network monitoring, providing a window into their thoughts about current issues. Those features, listed in order of importance, are capacity planning (79%), automated investigation (77%), application-aware visibility (65%), and predictive modeling (58%).

By improving network visibility, an agency will have improved network reliability, know about problems before end-users do, experience improved network speed, maximize employee productivity, and gain have insight into risk management/cyber threats. Because IT executives will be able to see an agency’s whole network, they can become proactive in not only fixing issues but avoiding them as well.

With today’s globally distributed federal workforce, network visibility is critical to monitoring performance, and identifying and quickly fixing problems.

Using network monitoring tools is a critical step toward managing the complex network environment and ensuring transfers to the cloud are effective and beneficial experiences for the agency, the end users and, ultimately, the constituents.

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