CapitalStream Corporate Take-Over

by Christopher Menkin

“What is John Kruse's position as I had him as vice-president of

business development.”

From: Karen Thorsen <KarenT@CapitalStream.com>

 Subject: RE: confirmation

 Date: Wed, 30 Oct 2002 13:07:09 -0800

“John Kruse, Sales Representative.”

 second e-mail

“Kevin Riegelsberger is President & CEO

“David Orren is Executive Vice President of Sales & Marketing,

“Kaveh Majoob is Vice-President of Development,

“Mike Pennell is Vice President of Marketing

“Jeff Dirks is Executive Vice President, Business Development

“thanks for checking!”

Karen Robert Thorsen

PR/Marketing Manager, CapitalStream

206-548-1703

www.capitalstream.com

 All these management people worked with Kevin Riegelsberger at

Platinum/Epicor. There has not been any founders at WiredCapital since March 2001 when Riegelsberger joined the company. Ex-WiredCapital founders have told Leasing News they are not happy about the stock situation.

Stock options is the question of the hour. In essence they eliminated all the common stock. Leasing News was told that was true for both CapitalStream as well as WiredCapital and that post the acquisition then they would issue the remaining employees CapitalStream stock. It is not know if the company has awarded the stock to the employees. It is not known what happened to the preferred stock. This is a privately held company.

October 11, a press release from CapitalStream “...announced that it has acquired WiredCapital, a provider of enterprise automation software solutions for the Commercial Finance Industry, based in Orange County, California. The combined companies will continue operating under the CapitalStream name. Along with the acquisition, CapitalStream has raised an additional $10 million total in equity financing.”

John Kruse is one of the originals of System1 which later became CapitalStream.

The company started from developing a leasing tracking system for Jim McCommon, McCommon Leasing, Bellevue, Washington. One of the original beta users of the system was American Leasing, Santa Clara, California. The program became very popular with both brokers, discounters, and lessors and at one time was planned to go “seamless” with then Nation’s Credit under Jim Merrilees in Oregon over the internet. This evolved into an internet system with scoring of credits and processing of lease transactions, at one time, utilizing the “back-end” capabilities of LeasePlus Accounting software. (For the record, John Kruse has made no comments “on” or “off the record,” and we were told not available for comment—to go through marketing). Mr. Kruse was the Top Gun Conference Chairman at the United Association of Equipment Leasing Association in San Diego, serves as a director on the board and is very popular in the leasing industry, extremely well known and highly regarded.)

“When we were first told as employees of the potential deal they called it a

Merger, with Capital Stream being the surviving name because we were

better known in the industry, “ an ex-CapitalStream employee told Leasing News.

 “ People at WiredCapital were not told they were being acquired till the week of the press release. In fact, several had planned to attend the Equipment Leasing

Association Conference in San Francisco. They were surprised. They also lost

their founder stock options and other benefits, I am told.”

In its “hey day,” the Seattle based company had 130 employees, then announced

in 2001 a reduction to 90 employees; 2002, when the Stephen Campbell left the

company, it was reported to be 60 employees “as product had been developed. and

major cuts were made in the “sales force” and direction due to an effort

to go after major corporate accounts, rather than the “small” and “middle”

market place in the banking, finance, and leasing industry.

According to John Kruse, then vice-president of business development, CapitalStream, had 56 employees and WiredCapital 23 employees, many, so taking away 26 employees leaves 53. There have been further reduction in employees, it is reported.

Thirty of the employees were reported to be “engineers” needed to write and maintain the software to service customer accounts.

The press release claimed CapitalStream was purchasing WiredCapital for

$10 million. Interesting there is no mention of "leasing" rather only "financial institutions" this being because they are targeting beyond leasing, as it was identified early in that leasing was too small of a space. The idea being that leasing would be the spring board into the other sectors of a bank or financial institution.

"Our market research indicates that the industry has tried to solve this problem through internal systems development because a truly viable solution provider

had not yet emerged,” Riegelsberg stated in the first press release.” With the recent funding and acquisition, CapitalStream is now perfectly positioned as the leader in financial front office automation with a proven track record

of success at some of the most respected brands in banking and

finance."

In a telephone interview, Riegelsberger said the purpose of the two

software programs was to provide “solutions for businesses.” He said

both programs could exist for the same company in different divisions

as they served “different needs.”

He was not able to elaborate. In trying to describe the difference

between the two software approaches, Leasing News described the difference

as WiredCaptail appearing to have been designed from a mid to high ticket perspective, while CapitalStream was really a small ticket product. For instance their product does not even have the concept of a repeat customer in it. WiredCapital tracks master credit lines, and allows for a single customer to have multiple Master Leases, as well as if that customer is a guarantor to a different customer, it is all being tracked to the single exposure customer. Things like that were built in from the very beginning.

CapitalStream's desktop product (Centerpoint) offered those things, but

 instead of porting that to the web, CapitalStream started over and wrote

 "FinanceCenter" which did not yet incorporate Master Lease or a Customer

 entity. Those enhancements were under construction and Mr. Reiselsberger

said he was not aware of this and referred any questions regarding this to “marketing.”. An engineer who was working on the program told Leasing News the missing Customer Entity and Master Finance agreement were, indeed, on the top of the list of "what's stopping CapitalStream from getting more big deals."

It is true CapitalStream had major clients such as division of Textron, Bank of the

West, and WiredCapital’s latest customer was Arrow Capital of San Jose, California.

Reiselberger said his main focus was “bandwidth of the company from the investors viewpoint.”

He added that he would insure customers would either have a hosted program or

a licensed program or both, depending on the needs of the company, and it would

be possible to migrate from one to the other. He concluded that the description of

now being able to service small customer needs to large customer needs would

be accurate as to the reason for the “merger” of both software programs.

He confirmed the company would continue to be a “front control” and would

not venture into financial accounting, “back end,” which his former company

presently offers. They do not have a leasing accounting program, he stated,

or any accounting program to merge with CapitalStream or Wired Capital.

Featured on January 6, 2003