Fundraisers 31 August 2021

Debt, Equity or Both? Practical Thoughts on Startup Financing

 

Fundnel hosted an engaging discussion with a founder, investor, and lender on how startups and founders can arrive at a balance between debt and equity raises, and how founders can raise financing while maintaining a healthy cash runway.

More often than not, the first thing that comes to mind at the very mention of startup financing for startups, is equity. News of startups raising equity from renowned VCs, achieving decacorn or unicorn statuses tend to dominate the headlines of online tech publications, but comparatively little is said about what is often perceived to be the less flashy, less sexy, more down-to-earth cousin of equity — debt.

Fundnel hosted an engaging discussion with Mahesh Niruttan, Chief Executive Officer of 20Cube Logistics and our Fundnel Founders Resources partners —  Giulianna Crivello, Head of Ventures at Draper Startup House, and Zhiyi Ng, Head of Business Development and Partnerships at Lyte Ventures on how startups and founders can arrive at a balance between debt and equity raises, and how founders can raise financing while maintaining a healthy cash runway. We also looked into the future by getting our panelists’ insights on how the debt financing landscape will continue to evolve.

​​Watch the discussion above for an hour of insights including:

  • A CEO's perspective on how a company’s financing objectives change as a company grows, and philosophies when it comes to managing cash flow for your business [16:33]
  • What lenders like Lyte Ventures look for when evaluating potential borrowers, and how they manage the risk of lending to sometimes early-stage startups [23:33]
  • What early-stage investors like Draper Startup House are seeing in the financing ecosystem, and if any early-stage startups are exploring debt as a financing option [5:28]
  • How investors have seen early-stage companies navigate conversations with investors around revenue growth and cash flow, and the regional differences observed [29:21]
  • How the lending space has changed and how it will continue to evolve [36:18]

What is venture debt?

Venture debt has a fairly broad definition, and covers a variety of loans — including asset-based loans, convertible notes, term loans, or revenue-based loans to investors — and may also include features such as warrants, or the right to purchase equity, to compensate for the higher risk of loan default.

In Southeast Asia, venture debt is still a relatively young asset class but is steadily getting recognition. According to a report by PWC, in 2020, venture debt made up around 10% of overall venture funding volumes in SEA, compared with 19% in the US. In February 2021, the Singapore government extended and enhanced its Enterprise Financing Scheme Venture Debt Programme to support the growth of later-stage enterprises — raising the maximum loan quantum from SGD5m to SGD8m.


Find out more about how Fundnel works with fundraisers across all stages of growth here.


This article and the linked webinar (collectively, the "Information") are intended for general informational purposes only. They are not, and should not be construed as, any form of financial, investment, tax, or other professional advice provided by Fundnel Pte. Ltd. ("Fundnel") to any person who is directed to or otherwise accesses the Information, including yourself. You are responsible for seeking professional advice before making any investment decision. Fundnel is not responsible for any loss you may sustain in relying on the Information.