Recaps, Downrounds and Cap Table Engineering: What Really Happens When Your Growth Plan Fails with Steven Finn
Steven Finn breaks down the harsh realities of startup financing when growth plans derail, examining how founders navigate recaps, downrounds, and cap table restructuring. His framework for evaluating predatory financing options—whether debt or equity—offers a nuanced view of blended capital costs that challenges conventional wisdom about always avoiding debt.
Key takeaways
- •Evaluate debt and equity financing through a blended cost of capital lens rather than dismissing either option categorically.
- •Reasonable debt backed by genuine collateral can be preferable to heavily dilutive equity in depressed markets.
- •Predatory financing exists in both debt and equity forms, making due diligence on terms crucial regardless of instrument type.
- •Early-stage equity deals in down markets can carry hidden costs that rival traditionally predatory debt structures.
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