2026 has picked up exactly where 2025 left off: messy and volatile. And boy did it show up quick!
When things are unpredictable, the (structural) decisions you made in calmer times can save you. That's why, in this issue, I dive into funding structures. I summarized our learnings from working with hundreds of companies. While it lacks the “glamour” of a Series B post on LinkedIn, getting these mechanics wrong is a primary cause of founder regret. At the end, you'll find data relevant to any founder. Our data team analyzed 4,000 businesses on our platform to provide you with a sense of how runway, revenue growth, and leverage ratio can appear when approaching lenders.
Also, you’ll notice a design refresh. Since the December issue, this newsletter has a new content structure. Design followed during the break. Together with our designer Thanh, I rebuilt the look and feel to make it cleaner and easier to read.
Cheers,
Christoph
Good funding structures are boringly correct, not creative. They are built to still work when your plan doesn't. The founders who get this right are the ones who adjust mix, size, and timing accordingly.However, most founders struggle because they treat fundraising like a trophy. The result is predictable:
What I see: most funding structures aren't designed at all. They're improvised and too late taken care of, optimized for closing the current round rather than planning the next 24 months.
So how do you fix this?
In the past years, we worked with more than 500 startups on their funding structures. We distilled our experience into six dimensions. These may help you get a better understanding of what funding structures should look like.
Different capital types serve different purposes. The most resilient structures we've seen combine them strategically. Three questions help you choose your type:
Equity is patient. There is no repayment, and it is often necessary for uncertainty. But equity isn’t neutral. It's demanding and comes with expectations that compound faster than most businesses grow.
Debt is simple: you borrow and repay it. It's great for predictable use cases with measurable ROI. However, debt is time-bound. It doesn’t adapt to your product or operational reality. It’s not emotional – it’s due.
My take: Companies that struggle usually stop at the first question. Companies that scale answer all three. They start from the intended use of funds, not from what investors offer.
How this looks in practice
A B2B SaaS company had interest from VCs for an €8M Series A at a €35M valuation. They also qualified for a €2M credit line and a €1M R&D grant. Instead of taking the full €8M in equity, they took €4M at a €25M valuation, plus the credit line and grant.
This gave them 18 months to reach €3M ARR while preserving €4M in equity capacity and lowering growth expectations from 100% to 60% YoY – room to make strategic decisions without investor pressure. Twelve months later, they hit €3.2M ARR with 75% retention and raised a €12M Series B at €60M valuation.
This is a rational construction of funding structures that match capital to operational reality.
This is where some founders become careless. They focus on headline numbers and skim the fine print. But terms determine how capital behaves in practice.
For equity:
For debt:
Every term creates constraints. Some constraints are productive, and they align incentives and force discipline. Others are time bombs. The problem is you often can't tell the difference until it's too late.
The strongest funding structures were negotiated by founders who understood that terms are the operating system of your business for the next 2-3 years.
How this looks in practice
We've seen founders accept harsh liquidation preferences because their runway and performance left them no choice. When you're three months from zero and your metrics are off-target, you take the deal on the table. Years later, those preferences meant that even a €50M exit left them with almost nothing, because all proceeds went to preferred shareholders.
The mistake wasn't accepting bad terms in a corner. The mistake was ending up in that corner in the first place, missing the moment to build leverage when they still had runway and options.
Capital comes with behavior, and the people behind it do too.
For equity, this is critical. You're entering a relationship that will last years. Like any relationship, the problems don't emerge during the honeymoon phase. They emerge when things go sideways. The best ones support you through uncertainty.
For debt, the dynamics are simpler but equally important. If you get debt from a lender who is familiar with startups and growth companies, covenants should trigger conversations, not automatic defaults.
The difference between rigid enforcement and flexible partnership matters immensely when you're nine months into a 24-month plan and realize you need to adjust course.
A €20M VC round feels like a victory (which it is!). With a full bank account you have more time to figure things out. However, there is one issue we've seen repeatedly with full bank accounts: The discipline dissolves, and operating costs skyrocket.
Well-structured companies raise less than they could. This sounds counterintuitive. More money means more runway, right? In theory, yes. In practice, more money creates more pressure.
The real world catches up fast. It starts with flat valuations, and ends with continuous equity injections from existing investors just to keep the lights on, each one at worse terms than the last.
How this looks in practice
One company burned through €8M in twelve months while revenue stayed flat. When they approached investors for their Series B, the response was: "What did you spend the money on?" They had no good answer. They'd scaled the team from 12 to 45 people. The implied customer acquisition cost was bad. No rational investor continues funding this.
Bad funding decisions optimize for the current transaction. Good ones map second and third-round effects. The terms you accept today determine your options tomorrow. The valuation you optimize for today creates the growth expectations you'll need to meet tomorrow.
Model three scenarios before signing anything:
The strongest structures we've seen come from founders who understand that every euro raised creates second and third-order effects that either expand or collapse strategic options.
This is the conversation we dread most. A founder reaches out with 2-3 months of runway left. They need €500K in debt to "bridge the gap" until they can raise equity.
The timing pattern that separates strategic funding from desperate funding is consistent:
Companies that use capital effectively start their financial planning months before they need it. They identify when they'll run out of cash and begin conversations early. They build relationships with lenders and investors continuously, not frantically.
This creates two critical advantages:
The most successful funding structures are often those that are unremarkable.
How this looks in practice
A logistics software company needed €1.5M to scale their sales team and fund CAC. They had €2M ARR with strong retention and clear unit economics. They could have raised €5M in equity. Instead, they took €1M in a revolving credit line, plus €300K from an angel investor who wanted to support the founders.
The company did the math. The credit line covered the sales hires and the CAC until customers turned profitable. They could draw money as needed and only repaid what they were using. No fixed repayment obligations that would strain cash flows.
The €300K in equity added an additional buffer and brought on an experienced operator. Total raise: €1.3M. That’s less than they could have raised. However, the structure gave them maximum flexibility.
Eighteen months later, they hit €4M ARR. They never used more than €800K of the credit line because their cash flows were strong. They raised a €3M Series A at a €25M valuation with minimal dilution because they'd preserved equity capacity and could present strong metrics.
Nothing about this structure was creative. It was smart, and it worked.
Such examples match capital to purpose, built in optionality, and focused on fundamentals rather than optimizing for vanity metrics. That's what good funding structures look like: clear thinking about what you're trying to accomplish and what kind of capital fits that purpose.
Once that clicks, the structure becomes obvious.
Runway, revenue growth, leverage ratio: We evaluated the signals companies seeking debt actually show. The following numbers represent an average company on our platform. The key takeaway: Think about debt early; optionality doesn’t appear in a crisis.
Nobody likes pressure. Lenders hate it even more. If your runway is tight and you need debt to keep the lights on, every (serious) lender will pass. Make sure you have enough runway (at least 6-8 months) when approaching a debt provider.
You don't need 100% YoY growth to get debt (it doesn't hurt). Debt is a numbers game: stability beats hype. It’s not about chasing growth at all costs but achieving it efficiently.
A debt-to-equity ratio like this comes from highly predictable revenue. Lenders don’t bet on hope. They want proof you can repay what you owe. Predictable revenue and low churn rates are key factors for this.
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