We tracked down Paul Deninger, a vice chairman at Jefferies who brought up the interesting problem with venture capital and debt at the National Venture Capital Association’s annual meeting. During a panel yesterday, Deninger said “VC’s don’t understand debt, we talk about the upside opportunity, but no one with debt gives a rats arse. They can only partake on the downside.”
He says institutions aren’t interested in lending in advance of cash flow, which is where many startups are.
This is the big conundrum in clean tech. Building a factory to crank out solar panels or electric cars, costs hundreds of millions of dollars, but lenders are wary of companies that don’t have positive cash flow (or are risky). We need to invent new financial structures to fix this problem, Deninger says .
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