March 18, 2014 - Recently, I happened to be the third wheel of a conversation between two active angel investors who were talking about a particular company that was closing a round of funding (names will remain anonymous to protect the innocent). I was somewhat familiar with the company but not intimately; thus, I was able to listen to the debate –er, conversation – with a completely open mind.
March 18, 2014 - In this three part series, I will focus on the nuances of venture debt when applied to life science companies. Up first, the “black box” of life science lending–insight for companies and investors about what happens internally once the typical due diligence package is received. Next, in Part 2, I’ll cover how debt can add value, with a focus on biotech/pharma, medical devices and diagnostics/tools.The last installment, Part 3, will focus on the potential downside(s) to debt, and situations that are best funded by equity.
March 5, 2014 - Many entrepreneurs have heard horror stories about taking on venture debt. Whether a lender fell asleep at the wheel, a borrower painted too rosy a picture about operating progress, and/or an investor had a change of heart, these horror stories tend to end the same way – with a lender sweeping cash, a borrower unexpectedly ceasing operations, vendors taking legal action, and Board members vowing never to do another venture debt deal.
March 5, 2014 - Put simply, hedging is an exchange rate risk management strategy to protect against changes in foreign exchange rates. A lot of companies will only look to discuss hedging after foreign exchange rate movements have moved against them, hurting their bottom line. Understanding a few hedging basics may help your company get ahead of the game in deciding when to consider using hedging mechanisms, so you don’t have to find out for yourself.
March 5, 2014 - As a banker, I’ve spent far too much time in the weeds of Excel financial models for startup companies. Startup finance is not always the most fascinating work, and many founder CEOs are technologists who have no interest or experience with the “numbers” side of a startup. Yet, there are some very basic “Startup Finance” concepts that I think are imperative for entrepreneurial execs to grasp as they grow their businesses. Don’t worry, I’m not suggesting you understand all the inner workings of QuickBooks or GAAP revenue recognition – here are two key areas that will be crucial in growing your venture.
February 24, 2014 - In the last installment of this series on venture debt, I wrote about the difference between traditional middle market lenders and “venture lenders” – who provide debt financing to pre-profit companies with little in the way of tangible assets. I also talked about the various financing solutions that venture lenders provide, such as loans that bridge to a startup’s next equity round, provide growth capital for new hires, etc. In this installment, I’ll talk about typical venture debt terms and the implications of each.