Debt is Coming

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.

Companies with poor unit economics found themselves propelled by aggressive venture dollars (which themselves were propelled by a low-interest-rate environment). Those companies then turned those dollars into aggressive customer acquisition. Until recently, the market rewarded growth at all costs.

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