By Will Godfrey
22 Nov 2021
Post outline
A big pain point for hardware companies wanting to adopt or expand their producer owned models is deciding on how to fund the transition and continued issue of working capital.
An illustration of the journey a company takes in moving from the traditional linear ownership model to a more a circular one is best described via The Fish Model which was created as part of the Technology-as-a Service playbook.
Image courtesy TSIA.com
Picking the right source of capital can be a bit of a minefield with multiple options that sometimes overlap or seem similar. Here we have laid out six different options you have, who (what type of business) each one might be good for, and some things to watch out for.*
*Please be aware that we are not making any suggestions or recommendations as part of this piece. Our aim is to inform you about the different options in a succinct way. But please do your own research before making any decisions.
The options we will go through are:
The reason we are bundling venture and venture debt together is that debt funding always follows equity funding. Lenders of venture debt normally use the fact that you are backed by venture capital as a form of validation for giving you the loan in the first place. The flip side of this is that venture debt might not be available for you unless you have taken venture capital in a previous round.
Who is it good for: If you are a high growth startup looking to fund your next stage of growth, then venture and venture debt could be the right option for you. Particularly because, compared to other forms of lending, getting funded this way doesn't require you to be cash flow positive.