SaaS has brought transparency and automation to many critical functions, spawning multi-billion-dollar companies across CRM, HRIS, ERP and many other categories. Despite being among the largest contractual obligations of most companies, leases have been strangely absent from both financial statements and core systems of record and automation. Leases -- for office space, vehicle fleets, radio towers, MRI machines and everything else companies rent to run their businesses -- largely have been overlooked, until recently, by software. These leases have typically resided in disparate desk drawers and file folders and been loosely tracked in Excel workbooks. For investors and business analysts, leases have lived on financial statements as incomplete snippets of information buried in footnotes. As a result, real estate and facilities teams have missed key lease contract dates, lawyers have fumbled important contract negotiations, HR teams have struggled with space planning, finance teams have been surprised by fixed payment obligations that behave much like debt, and the true financial condition of companies has been obfuscated from investors and analysts.
That’s where Visual Lease steps in. Visual Lease offers elegant, cloud-based lease accounting and administration software to more than 600 companies that need assistance managing real estate and equipment leases and complying with new accounting regulations. Importantly, Visual Lease provides a path towards the standardization of best practices for managing important information historically scattered across geographies, departments and operating units. Today, we are excited to welcome Visual Lease to the Spectrum Equity portfolio.
Central to the creation of Visual Lease’s platform has been Marc Betesh, Visual Lease’s Founder and CEO. Marc is an attorney by training and a leading expert on commercial lease negotiation, lease interpretation and expense reimbursement clauses. Marc began his career in New York City where he helped large corporations negotiate and audit their multi-million-dollar real estate leases.
However, Marc has always had an entrepreneurial spirit in him tracing back to his teenage years when he built a point-of-sale inventory management system for his family’s furniture store. As a practicing attorney, that entrepreneurialism led him to found KBA Lease Services in 1985, a commercial real estate lease auditing and services firm. While at KBA, Marc recognized the need to use software to centralize the management of equipment and real estate lease portfolios, and Visual Lease was born. Marc’s subject matter expertise and product vision have created a platform used by companies of all sizes, with diverse lease portfolios, and across multiple geographies.
New U.S. and international accounting and reporting standards—known as FASB (ASC 842) and IASB (IFRS 16), which Visual Lease’s Founder and CEO helped to shape—require public and private companies to record their lease obligations on their balance sheets. This change brings an estimated >$3 trillion in notional lease value onto corporate balance sheets on an asset/liability level according to a CNBC report.
These regulatory updates create an urgent market opportunity—hundreds of thousands of companies must locate their equipment and real estate lease contracts and begin incorporating them into their regular financial close processes. Recorded lease obligations must be both correct and current, otherwise companies face fines and more. The average Fortune 500 company is estimated to have between $100 million and $1 billion in lease liabilities across real estate and equipment leases according to the findings of an industry consultant. Those same companies have been slow to adopt lease management software in the absence of this regulatory imperative.
Spectrum Equity has a long history of success investing in growing financial, risk and compliance software companies, such as Ethoca, Origami Risk, Risk Metrics, Trintech, Verafin and World-Check. Like Visual Lease, these companies use deep vertical functionality and cloud-based software to help their customers in various industries better manage risk and compliance, making data centralized and actionable. Moreover, the Visual Lease system can interface with a company’s individual accounting, management or workforce software as well as other pillars of company infrastructure to further streamline lease-related process and management.
In 2018 alone, Visual Lease nearly doubled its customer base. Visual Lease has onboarded customers across a variety of industries, from healthcare companies that use Visual Lease software to manage hospital beds to communications companies that manage cell towers to construction companies that manage cranes, trucks, pavers, plows, loaders and more. All have committed to multi-year engagements with Visual Lease, and the company has received high marks (and >100% annual revenue retention) in our market study for the platform’s flexibility and customer-driven culture.
Customers by Industry
While the recent accounting standards create an adoption imperative, Visual Lease is tapping into a much larger, long-term market opportunity. We at Spectrum see the long arc of companies increasingly automating critical operations to enable better decision-making, ensure compliance and mitigate business risk. Lease accounting and management is ripe for this type of digital transformation, and the cost of errors made in managing leases has magnified the need dramatically thanks to ASC 842 and IFRS 16. The days of signing a lease and stuffing it into a drawer are over.
And many functions stand to benefit. Visual Lease streamlines a range of workflows for customers, from automated payments and reporting financials to budget forecasting and enforcing compliance. Through automation, Visual Lease helps its users across legal, finance, facilities and real estate, IT and procurement make informed business decisions. The average Visual Lease customer had over 20 active users on the platform in June 2019 alone.
This is only the beginning. The compliance imperative is permanently dragging leases into the light of day, and this will only grow demand for Visual Lease’s administration and accounting platform. Visual Lease is actively growing its go-to-market and product development organizations to meet that current and future urgency with the goal of building an enduring, global category leader.
For more information on Spectrum Equity’s new partnership with Visual Lease, please read the press release.