The long, windy road to a closed deal


The typical way that startups raise capital is to wait until they have 6 months of runway and then start a roadshow. They put a slide deck, model and pipeline together and hit the road.

Sometimes, this approach is unavoidable. Especially early on when you have less time and runway to be strategic. The problem with this approach, however, is that you are more than likely to get lots of “no”s.

The reason is that you’re asking relative strangers to enter into a multi-year, illiquid, risky relationship with you. You have to raise now. You leave no time for potential investors to track your progress. So, they will probably just pass. Continue reading The long, windy road to a closed deal

The Spotify debt deal: A cautionary tale


Techrunch reported yesterday that Spotify has raised a whopping $1B debt deal. This is on top of the $1.1B in equity that the company has raised to date. As I read about this deal I noted some terms that raise concerns and serve as an important lesson for the rest of us as we think about how to capitalize our companies:

TPG and Dragoneer get to convert the debt to equity at a 20% discount of whatever share price Spotify sets for an eventual IPO. And if it doesn’t IPO within the next year, that discount goes up 2.5% every extra six months.

Spotify also has to pay 5% annual interest on the debt, and 1% more every six months up to a total of 10%. And finally, TPG and Dragoneer can sell their shares just 90 days after the IPO, before the 180-day lockup period ends for Spotify’s employees and other investors.

Continue reading The Spotify debt deal: A cautionary tale

When should you get on the VC train?


I think we can all agree that the startup industry pays too much attention to VC. Our conferences, press, and tweets are dominated by VC-related news. Which fund just raised more capital? Who got funded? Who’s the latest unicorn? I contribute to that fixation in this blog all the time. 

With the rise of accelerators, the holy grail for young startups these days seems to be to get into YC as early as possible and then go on to immediately raise from VCs post demo day. 

There are certainly some massive successes that have followed this hype-laden path: Airbnb, Dropbox and Gusto are some of the biggest winners that come to mind. Closer to home, YC grad Vidyard is crushing it. But they passed on the hype in the Valley. They came back to Canada and took their time. Continue reading When should you get on the VC train?

What you need to know about warrants

I often get questions from CEOs about warrants, so I thought I would share a primer on them here.

A warrant is basically like the options that you give to your employees. It is a contract that enables the holder to buy shares in your company at a fixed price.

Warrants are typically given to investors as an incentive for investing. You see them most often with venture debt rounds. You see them less often as part of an equity round.


A typical venture debt loan might have 10% warrant coverage. In this example, a $5M loan would require you to issue a warrant for $500K worth of shares in your company. Continue reading What you need to know about warrants