I suspect we shall see debt used increasingly in venture-backed businesses. My hope is that operators will constrain its use to areas where debt is a more natural fit. Personally, I’m not there yet on its application to SaaS revenue.
In contrast to VC - where over the past 30 years of software, there’s been a circular “we shape our tools, and then they shape us” coevolution around how equity works - this hasn’t happened for debt yet. We haven’t figured out the right atomic unit
One trend that is an important identifier of equity/debt beginning to blend is the premium placed on SaaS revenues. Markets will buy SaaS revenues at high multiples (i) because they are high margin but also (ii) because of their predictability. “Cheap equity is essentially expensive debt.” So starting to see equity get priced closer to debt for the... See more
In a few years, data startups, consumer apps, and software vendors will rise and grow - the same as today.Some of them will employ the four fundamental innovations of web3: permanent ownership, paying customers with “equity,” regulatory arbitrage, and new governance models (DAOs).
Tech is still heavily dominated by startups, and will probably continue to be for a very long time. But as tech matures as an industry, and there are more extreme wealth outcomes, there is now (as one might expect) an increased interest in solving ambitious problems with philanthropic capital.