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Case Study

Elite: Affinity financing and smart leases

By Benoit F. Leleux and Marc Chauvet

11 pages

December 2021

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Reference: IMD-7-2285

The case documents the original mattress leasing program initiated by François Pugliese, the owner of premium mattress firm Elite in Etoy (Switzerland). Since the beds he sold targeted the higher end of the market, it quickly dawned on him that customers could be tempted by a leasing offer instead of a standard purchase arrangement. In 2012, François launched the Smart Lease program: Mattresses were equipped with connected pressure sensors that could identify occupancy and relayed the information to a centralized system that monitored mattress usage and invoiced the client accordingly. Smart Lease was an immediate hit, earning some distinguished innovation awards in the process. On the financing side, though, François faced a dilemma. Smart Leasing was so successful that it created serious issues in his finances, made worse by the fast growth of his flagship stores. How could he raise a large, flexible line of credit to finance these strategic endeavors without diluting himself? He engineered a very original affinity financing solution, a convertible loan program offered to friends and family, with conversion possible under conditions to non-voting participating shares. DAMICI was a triple win: Money raised at favorable variable interest rates, a chance for friends and supporters of the firm to get involved in its future success, and a balance-sheet strengthening move. The case documents in great detail the operational and financial features of the Smart Leasing program and the DAMICI affinity financing model used to provide the funding both for leasing and for general growth options for the company. It offers rare insights into an original financial engineering montage that offered cheap, flexible financing to a high-growth entrepreneur.

Learning Objective

Discuss original financial engineering efforts, in this case mostly for working capital purposes, taking advantage of tax and accounting regulations to create a formula of interest to the various parties.
Reflect on what the objectives of the financing are, compare the traditional offerings available (bank debt, equity, etc.) and are prodded to engineer a superior offering for all parties involved.

Keywords

Entrepreneurial Finance, Growth Finance, Working Capital, Affinity Financing, Guerrilla Financing, Leasing, Convertible Bonds, Friend, Family, Angel Investor, Growth Management, Digitalization, Good Health, Well-being, Responsible Consumption, Responsible Production, Finance, Entrepreneurship, Sustainability, Growth, Digital

Settings

Switzerland
Elite Beds, Consumer Goods, Furniture
2020-2021

Type

Field Research

Available Languages

English

Related material

Teaching note, Video

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This case study is part of a series

Elite: Affinity financing and smart leases
Elite: The digital mattress company

This case study is part of a series

Elite: Affinity financing and smart leases
Elite: The digital mattress company

Elite: Affinity financing and smart leases

By Benoit F. Leleux and Marc Chauvet
Case reference: IMD-7-2285 ©2021

Summary

The case documents the original mattress leasing program initiated by François Pugliese, the owner of premium mattress firm Elite in Etoy (Switzerl...

Reference IMD-7-2285

Organization Elite Beds

Industry Consumer Goods, Furniture

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Finance

Entrepreneurship

Sustainability

Growth

Digital

Browse all topics

Elite: The digital mattress company

By Benoit F. Leleux Marc Chauvet Thierry Cairus and Olivier Blanc
Case reference: IMD-7-1984 ©2018

Summary

François Pugliese acquired Elite Beds in Etoy in a small buy-in in 2006 and then proceeded to re-invent completely its business, first by pivoting ...

Reference IMD-7-1984

Organization Elite Beds

Industry Consumer Goods, Furniture

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

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