I was sort of surprised the first time I learned that anyone would give you financing for debt. Even at a 20% discount rate, it seems like a successful startup

I was sort of surprised the first time I learned that anyone would give you financing for debt. Even at a 20% discount rate, it seems like a successful startup should be increasing their valuation by a lot more than 20% between rounds. Conversely, debt seems like a really bad deal for investors. They only get a 20% discount when the company goes into Series A financing, in return for the risk that the company will go belly up before then and they lose it all. How does this square with the (admittedly problematic) conventional wisdom that investors look for a ~10x return on their money and expect ~1/10th of companies to fail?