![]() Most importantly, the business must have a clear path to profitability. Established revenue model and healthy margins: High growth companies with an established revenue model and strong margins can strategically allocate debt to support its current operations and scale.Existing investors backing the company: Lenders derive comfort from the quality of investors and their willingness to support the company in the future.The strength of the founders and key management personnel: The qualities funds seek in founders will include domain expertise, vision, and the ability to build robust teams, among others.What Parameters do Venture Debt Funds Look at Before Investing? Business-related ParametersĪ fund analyzes certain key parameters related to the business and the industry to arrive at investment decisions: Product research and development, investment in human capital, business expansion, etc. Runway extension, equity dilution prevention, financing working capital, capital expenditure, acquisitions, etc. Investors must sell their stake to realize their initial capital There is significant dilution in exchange for equity capitalĬost of capital is in the form of a predetermined fixed coupon There is minimal equity dilution through the issuance of equity warrants ![]() Key differences between equity and debt financing:
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