Economic innovation for a bright new world
Debt financing in startups
Friday - January 13, 2012.
It is good to know that there are still smart, rather than simply cunning, people in the finance world.
And Gene Lee, Managing Director of Cove Point Holdings, a Family Office describes my views exactly in an interesting article published by Axial Market. Specifically he emphasizes how financial debt in a smaller middle market business can be very risky and limit the operating flexibility and growth prospects of a business.
Primarily startups that work with subprime Venture Capitalists that have fragmented their investment risk and from the beginning do not have the ability to support the runway to upside completely are subject to the “blessings” of debt financing. The life-line of debt financing entering the startup world is an indicator of how subprime Venture Capital, downside investing, and the fragmentation and deflation of risk erodes the opportunity for groundbreaking innovation.
Now, If we could only design an economic system that translates the sanity from these kinds of Family Offices into a Venture Capital playbook. Perhaps that is why this Family Office is going direct.
Read the full article here
.
And Gene Lee, Managing Director of Cove Point Holdings, a Family Office describes my views exactly in an interesting article published by Axial Market. Specifically he emphasizes how financial debt in a smaller middle market business can be very risky and limit the operating flexibility and growth prospects of a business.
We don’t believe that it makes sense to compound the operating risk of growing a smaller company and the risk from an ownership transition with the risk of a leveraged capital structure that could have bad consequences for a company if it misses a beat.
Primarily startups that work with subprime Venture Capitalists that have fragmented their investment risk and from the beginning do not have the ability to support the runway to upside completely are subject to the “blessings” of debt financing. The life-line of debt financing entering the startup world is an indicator of how subprime Venture Capital, downside investing, and the fragmentation and deflation of risk erodes the opportunity for groundbreaking innovation.
Now, If we could only design an economic system that translates the sanity from these kinds of Family Offices into a Venture Capital playbook. Perhaps that is why this Family Office is going direct.
Read the full article here
.