4 ms·
I think this article is trying to make something out to be more than it actually is. Debt financing is a specific vehicle that can be used tactically for a rela
by Grimm1 7y ago
I think this article is trying to make something out to be more than it actually is. Debt financing is a specific vehicle that can be used tactically for a relatively mature business (Series A area +) with predictable revenue for specific growth I do not see it as this magical solution to the current issues of VC capital because alignment is often really out of wack in the early-stages before established product-market fit with high dilution and higher investor leverage.
In a mature business investors and founders are likely to be more aligned anyway because the founder's model has been working and has some length of history and predictability with regards to forecasting further growth and outcomes.
To put it plainly while you can get screwed in the later stages you're much more likely to get screwed in the early stages of running a company.
With that in mind, one of the main benefits, as stated in the article that the debt investment is not dilutive, is still nice at the later stages but I wouldn't say people should exclusively decide to go with debt based on that reason alone because the largest dilution (and by consequence chance to be screwed) typically happens in the earlier rounds (unless you're getting bailed out) anyway.