This Week in Startups Venture Debt: should your startup take it on? + Mi Terro's Robert Luo | E1593
Oct 23, 2022
Robert Luo, CEO and founder of Mi Terro, dives into the innovative world of synthetic biology by creating sustainable alternatives to microplastics using agricultural waste, like beer byproducts. He discusses how his startup targets the pressing microplastic crisis while navigating the competitive landscape. The conversation also highlights the risks of venture debt for startups, emphasizing the importance of financial strategy while maintaining sustainability in a fluctuating market.
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Venture Debt Warning
- Avoid venture debt unless your startup has product-market fit, revenue streams, and a clear path to profitability.
- Focus on customers, revenue, and product instead of debt in the early stages.
Venture Debt as a Negative Signal
- Venture debt can be a negative signal to investors, especially in a down market, as it indicates potential trouble.
- A down round might be less concerning than substantial venture debt, as it reflects market conditions rather than internal struggles.
Strategic Debt Use
- Use venture debt strategically when your company has substantial revenue and a path to profitability.
- Be cautious of aggressive debt providers, especially in down markets, as they can seize assets or demand high warrants.