Working capital is needed at every stage of a company, from day one through IPO. In most cases, startups will raise a seed round of equity capital from friends and family or venture funds. But when should a startup consider raising debt capital? We believe there is always an optimal mix and that also applies to the earliest of companies.
Every company, regardless of industry will go through three stages as the company grows: Launch, Inflection Point Stage and Pre-IPO. At each stage, the company will change dramatically, as will the founder’s role and responsibilities.
Venture Debt is perhaps the most frequently used and well known term amongst the startup community. However, venture debt really only occupies a small part of the larger credit capital landscape. Understanding what venture debt is and how it works relative to broader offerings is key.
Stages of company growth from a creditor perspective.
Compared to an equity viewpoint, from a credit financing perspective, these stages also exist and we’ve renamed them:
Here is a snapshot of what we believe are the key components and players for each stage of financing:
