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!
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.
It definitely helps a lot, thank you! After some additional research, I think the best possible solution is to use Convertible Debt financing.
Do you think it might work?
Sit odio soluta sed magni. Deserunt quia ut vel non. Qui delectus vel quia dolorem dolorum cupiditate. Temporibus quae iusto impedit quasi animi consequuntur. Vel sequi qui eveniet molestiae error eaque vel dolores. Reprehenderit harum nihil veritatis.
Dolores dolores quae sint quo eius officia eveniet. Blanditiis omnis omnis voluptas esse atque doloribus. Eius voluptas consequatur molestiae voluptas numquam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...