Introduction
Structuring a venture debt agreement isn't one-size-fits-all. In this article, we walk through our process, our team, and what goes into building each partnership at Mighty Partners.
We take a flexible approach — the steps vary based on the individual needs of the business, not a fixed template. At a high level, our approach breaks down into three key phases, which we'll unpack throughout this article.
- Discovery: understanding a business, its founders and the need for venture debt funding. Share indicative terms early.
- Credit Underwrite: evaluating a business to determine its growth potential and its ability to repay a loan.
- Funding: negotiating detailed facility terms, formal approvals including Mighty IC approval and transfer of funds.
Discovery
In the discovery phase, our team starts with an introductory call to understand the business's operations, the founders, and their funding requirements.
This means digging into the product or service, the market need it addresses, and its potential to lead that market. We talk through financials at a high level — revenue, existing runway, any existing debt and security, and previous equity rounds and investor support. We unpack the funds requested, intended use, and any guidance on the business's ideal funding profile.
Understanding the founders — their background, experience, and expertise — is just as important. This gives our team a clear read on the company's growth potential and whether it aligns with our own strategic goals. We're focused on long-term relationships, not one-off deals.
To keep things moving, we share indicative terms early — so both sides know where they stand before investing more time.
Discovery usually runs to an introductory call plus one to two follow-up meetings, online or in person.
Credit Underwrite
Following Discovery, we request businesses to provide a financial model, historical financials, a pitch deck/investor update and access to accounting and banking software.
Our investment team assesses a set of credit metrics, including annual recurring revenue, revenue growth, fixed and variable costs, runway, and any prior equity funding rounds, to establish a business's baseline capacity to service debt.
We understand that traditional credit metrics don't tell the full story, particularly for high-growth businesses. Our investment team draws on a range of methods to assess scalability and repayment capacity, calibrated to the business model, industry, and stage.
Once the investment team is satisfied a business meets our funding criteria, we issue updated terms reflecting the findings from due diligence.
Where we're unable to fund a business, we do what we can to support founders, including introductions across our network.
Funding
Once due diligence is complete, we move into final negotiations on terms, ensuring the debt is structured to meet each partner's specific business requirements.
Agreed terms are then put to Mighty's Investment Committee for approval. Once approved, contracts are signed and funds are transferred, often within one week. For us, transfer of funds marks the start of the partnership, not the end of the process.
Altogether, the process usually takes four to six weeks, depending on the availability of materials and how quickly the business is able to move.
Want a full breakdown of the terms that make up a venture debt agreement? Explore our interactive venture debt term sheet for a detailed explanation of terms including loan amount, repayment period, interest-only periods, covenants, warrants, and more.
If you're interested in Mighty Partners' venture debt funding, contact us here or schedule an introductory call with our Investment Manager, Luka.
