Hattangdi: Alteria underwrites 12-to-15 month refinancing risk, not five-year winners
Ajay Hattangdi · 100xEntrepreneur| Episode 22 | Ajay Hattangdi Managing Partner and Co-founder of Alteria Capital · Aug 14, 2019 · at 17:26
Ajay Hattangdi, co-founder of Alteria Capital, explains the difference between venture debt underwriting and equity VC investing.
0:00 / 0:27exact quote · 27.2s
▶ Watch the full episode on YouTube → 720p mp4 · rendered on demand · StarZero watermark
“For us on the debt side it's not so important to be able to see, look out five years and pick the winners. That's not how we would underwrite. How we would underwrite is we need to necessarily be more short term in how we think about the next round coming together. We need to think about whether this business, given this in these sets of investors and this business plan and this founding team is likely to get the next round of capital within the next 1215 months before it runs out of capital today.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Ajay Hattangdi
Ajay Hattangdi: Alteria targets slightly above 20% returns on venture debt
“And the expectation is that we will make a slightly upwards of 20% kind of returns in this business to compensate us for the risk we take.”
Ajay Hattangdi: VC-protected early-stage startups are unusually safe for lenders
“The two safest times to lend in our opinion are one is when the company is a large, you know, it's a mature adult, and the other time is when it's a small startup that is working very closely with the VC and being protected by the VC.”
Ajay Hattangdi: Traditional banking principles fail for venture lending
“Venture lending flew in the face of everything that we knew as a bank. As the underlying trade principles of how you lend to corporates. It didn't work. You had companies that were burning cash. You had companies that had no quote unquote valuable collateral.”
Hattangdi: Fundraising Before Hitting Milestones Severely Damages Startup Valuation
“And the last thing that you want to do as a founder is basically go into fundraise mode for your next round before you've hit those milestones, because then your valuation takes a real knock.”
Hattangdi: Venture Debt Protects Valuation and Founder Dilution by Extending Runway
“So in a sense, we think of venture debt as a way to extend the cash flow runway for the company involved. And in a way it helps to protect dilution and valuation.”
Hattangdi: Startups with unproven, emerging models should not be leveraged with debt
“Sometimes VCs do want to play, ah, in, in, in spaces where they have to explore certain models which are emerging, ah, but there is still some time to go before those models are approved, and, you know, that's not a risk that should be, ah, leveraged, in my op…”