Structuring investment in start-up

Hi! I am currently attanding a Private Equity and Venture Capital course at my University and one of the issues I need to address is:
From the venture capital fund perspective, how to structure an investment in a growing startup, if the funds require to be provided in the rather short time?

Any useful suggestions?
Thank you!

 
Best Response

If the startup has tangible assets (e.g. it sells t-shirts) you can probably structure an Asset Backed Loan with a revolving structure and then use an additional equity raise to fund the operations.

If ABL isn't possible, then just straight equity. Generally early investors will want a participating preferred security.. it the company is doing a little better, they'll settle for convertible preferred.

TBH, the question itself is weird though. Investing in startups always takes a long time as investor diligence stuff out. Unless it's an ABL or lowly levered loan (unlikely for a startup), people will be doing growth equity underwriting... takes a while.

Not sure this helps or just makes it messier.

 

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