Should we take venture debt, or cut burn?

The term sheet is sitting in your inbox. On one side, capital that keeps the plan alive. On the other, a round of cuts that makes the plan smaller and everyone quieter.

Both feel like a verdict on you.

Here is the thing worth knowing before you choose: you're not really choosing between debt and cuts. You're choosing based on a number you may not have.

Capital multiplies what a customer is already worth

Money doesn't change what a customer is worth to you. It just lets you go and get more of them, faster.

That's the whole mechanism. If each customer pays back more than they cost to win and serve, capital compounds something good. If each one costs more than they return, capital compounds something bad, and now there's a repayment schedule sitting on top of it.

Borrow against economics that don't work2

Fix the economics, then borrow9

So the question isn't "can we get the money." It's "what happens when we pour it in."

Two situations that feel identical from the inside

You might be under-capitalised. You make real margin on each customer. You simply can't fund the gap between spending to acquire them today and earning it back over the year. Here, capital is oxygen. Debt genuinely helps, and cutting would be the expensive mistake.

Or you might be mispriced. You lose money on each customer once fully-loaded acquisition and cost to serve are in. Here, capital is petrol. It lets the fire burn longer, at a valuation and a repayment schedule you now have to grow into.

From where you're sitting — growing, burning, under pressure — both feel like "we just need more runway."

One number

What to check before you sign

Take your last cohort, not your best month. For each customer: what did it cost to acquire them, all in? What does it cost to serve them? What did they actually pay back, and over how long?

If the payback is shorter than the term of the debt, you're looking at a financing decision, and debt is a reasonable instrument.

If it's longer, or if you can't compute it: the debt isn't financing growth. It's financing the gap while you find out.

Find out whether you're under-capitalised or mispriced · a Daytalens verdict, $5,000

The version of this that ends badly

The founder takes the debt because cutting feels like admitting failure. The money buys nine months. The nine months are spent acquiring more of the same customers who were already underwater, because nothing about the economics changed. Month ten arrives with a repayment schedule, a bigger team, and the same unanswered question.

That's not a financing failure. It's a pricing problem that was handed a bigger budget: the same shape as growing while losing money on every customer.

The cheaper question, first

You can decide the instrument in an afternoon. You cannot un-sign it.

So before the term sheet, spend far less to answer the question underneath it: does one more customer make you money, or cost you money? Everything about debt versus cuts follows from that, automatically.

Capital multiplies what a customer is already worth. Find out what that is before you multiply it.