A couple thoughts on raising money.
- Venture Capital financing is only done out of desperation. There’s simply no other way to get $1 million plus investments if you’re a private company.
- Venture Debt. Basically this is when an entrepreneur uses equity to back a loan from a venture firm. If the loan can’t be paid, it turns to equity. Often, if the loan is paid, there’s an option for the investor to transfer a portion (or all) of the loan into equity.
This is a great deal for the VC. If things go bad they can use equity (ownership of the company) as a backup. If things go well they own equity in an early-stage, high-value company.
Too often what's good for the VC is bad for the entrepreneur.