Hi there,
In this issue, I explore founders' options when growing their business, and their pros and cons. Which is the right capital strategy for you; equity, debt, or M&A?
Also;
📸 - Social Snapshot- Vibe coding SaaS 101
📊 - Q1 Venture overview
🎙️ - From debt to $1B startup with JC Glancy
🆓 - Free VC list and more!
Welcome to issue 116.
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Social Snapshot
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How ZenBusiness Went From Debt to Unicorn
with JC Glancy
In the latest episode of the Fundraising Demystified podcast, I spoke with JC Glancy who started his company working out of a storage room next to the toilet. He was drowning in credit card debt when he finally got an investment offer: $25K, but only if he gave up being CEO. He took the deal instantly. Fast forward, ZenBusiness becomes a unicorn..
Watch Now
Listen on:
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Data Corner
What happened in Q1?
Unsurprisingly, 20% of all deals went to the AI sector- but what did change last quarter?
According to CB Insights, VC is back on a growth trajectory, with the highest quarterly total since Q2 2022, and the highest median deal size of all time!
But it isn't all good news as the global deal count continues to decline and slid for a fourth straight quarter to 5,846 deals, down 7% QoQ and 28% YoY.
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Raising Capital for your startup?
Thunder's mission is to guide founders toward the right path to reach their North Star, be it through securing equity or debt financing or navigating the path to a successful exit.
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Pick the right capital strategy for your startup
Most founders already know there are three main approaches to raising capital: equity, debt, and M&A (there are others- check out my thoughts on alternative financing, plus exciting news from Thunder on non-VC investors coming soon- read on). Yet so many still chase VC dollars simply because that’s the loudest story in the TechCrunch headlines.
In my conversations with experienced founders, it's obvious that the “default” option isn’t always the right one. Instead, your choice should be as tailored to your business model, not dictated by FOMO on VC-funded success stories.
The High Stakes of Equity Financing
You’re probably aware that equity deals mean selling a piece of your company in exchange for the kind of growth capital you need to scale rapidly. The catch? You're giving up part of the control and a slice of the future value. The majority (about 70-75)of early-stage founders lean into equity rounds- although I reckon this number is dropping. Yet, that popular route comes with strings attached. Investors are looking for 10x returns, which forces you to run your business like it’s already at unicorn level. And while the allure of a high-profile exit is exciting, the reality is that about 90% of VC-backed startups never hit that dramatic upward swing, leaving founders with diluted ownership and often, diluted influence on strategic decisions.
Overvaluations in the equity space have created an environment where exit rates vary widely. Some research suggests that a mere 1–2% of VC-backed startups eventually reach unicorn status, a reminder that chasing equity isn’t a free ride (not that that has to be your goal). It demands relentless execution and often a constant pivot to meet escalating investor expectations
Debt Financing: A Double-Edged Sword
Debt is the route for founders who want to maintain control while accessing the funds they need. The math here is simple: Instead of giving up equity, you take on financial obligations with regular repayments. Data indicates that debt financing is a choice for about 15–20% of founders who have predictable cash flows.
It’s attractive because it keeps your cap table intact and forces you to be disciplined with cash management.
However, debt is unforgiving. Fixed repayments can quickly pinch cash flow, especially in early-stage companies that are still fine-tuning their revenue models. I’ve seen clients stress over loan covenants that leave little wiggle room for strategic changes. And remember, defaulting on debt doesn't just mess up your reputation, it can mess up your personal credit and, ultimately, your entire business. Don't take it on if you can't handle it.
M&A: Exit or evolution?
Then there’s M&A. This isn't just about selling out, it's a smart way to combine forces when you can't grow solo. I like to think of it as a tactical realignment. Over the past few quarters, M&A activity among venture-backed companies has nudged upward, partly because market pressures are forcing exits earlier than planned.
More early-stage exits now come through M&A, compared with a few years ago. This suggests a market that’s more willing to consolidate talent and tech, rather than hoping to IPO. But while an acquisition might offer liquidity and strategic synergies, it often means relinquishing control. Larger players come in with their own agendas, and cultural clashes post-merger are not uncommon. I wrote about how to get acquired a couple of weeks ago; you can read about that here.
What does the data say?
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Exit Rates & Unicorns: VC-backed startups have a low probability (about 1–2%) of reaching unicorn status despite aggressive fundraising. In contrast, companies that strategically opt for debt or even consider early M&A in the right conditions often preserve more of their core business.
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Failure Rates: Although debt financing is less popular, the failure rate among debt-funded startups tends to be lower than those reliant solely on high-risk equity rounds because debt forces tighter financial discipline.
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Market Trends: Across the US, Europe, and the UK, data shows that founders employing alternative capital strategies are beginning to emerge as more sustainable, especially in environments where public equity and VC markets are volatile.
*I haven't cited sources but Gemini's Deep Research had a bunch, and I just aggregated the data.
There’s no one-size-fits-all answer. If you’re in high-growth mode with massive potential to scale quickly, equity financing might still be your best bet. just be prepared for the long-term price of dilution and high-pressure expectations. Debt financing is ideal if you want to maintain control and have stable cash flows, but be sure your projections are realistic and your numbers tight. And if you’re at a point where scaling on your own is proving too resource-intensive, M&A could offer the strategic support or exit you need, even if that means giving up the helm.
The lesson here is straightforward: don’t follow the crowd blindly. And if you aren't sure, hit me up. It's exactly what we do here at Thunder- figure out the best capital strategy for businesses. Plus if you are interested in more than just VC, debt, and M&A, stay tuned- we're about to offer you access to loads more types of funders- think angels, private equity players, private credit providers, and even family offices. Hint: great time to create your Thunder profile if you haven't; exciting updates coming this month!
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Fundraising Resources
💸 - Access working capital fast - Explore options for free
😍 - Free list of AI Recommended VCs - Apply for free
👨💻 - Free fundraising coaching session - Schedule 15 minutes with us
📝 - Playbook for Negotiating Term Sheets - Download it Here
💽 - Playbook for Setting Up and Sharing Your Data Room - Download it Here
✉️ - Playbook for Sending Investing Updates - Download it Here
📞 - Guide to Nailing Your First Calls With Investors - Download it Here
📆 - Your 12-month Fundraising Plan- Download it Here
💫 - Pitch deck design services for founders by VCs - Decko
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Let's stay in touch:
- Written by Jason Kirby - https://www.linkedin.com/in/jasonrkirby
- Subscribe to our weekly newsletter for market and industry news and tips when it comes to raising capital and growing your business - https://join.thunder.vc
- Seeking to raise capital? Get your list of target VCs by creating a free profile here - https://web.thunder.vc
- Looking to raise debt? Explore tailored debt options for free by completing a profile at https://debt.thunder.vc
