Biro 2023

Abstract

The founder of Biro, a Canadian software-as-a-service startup, is considering different methods of fundraising for his company. In the high growth startup world, Founders must move quickly to capitalize on momentum and secure their operating runway as they build towards positive operating cash flow. To bridge the gap, Founders relied on external funding, in return giving up equity in their growing businesses. Over a month of solicitation Founder & CEO Wayne Frampton secured three offers from different sources, each with their own merits and concerns to be carefully considered. First, a famous startup incubator known for producing world-class technology companies. Though they offered promise and prestige, they demanded a large equity stake and adherence to their program. Second, a successful venture capital firm with a high-net-worth investment portfolio, and a large chest of capital to invest. They valued Biro highly, but put their own profits first and heavily influenced company decisions. Third, a longstanding bank specializing in venture debt and financial services. They offered a debt facility that would protect existing equity, but enforced strict debt covenants and hard operating guidelines for the term of the loan. Frampton had built a promising start in 7 months of operation but had reached a critical decision point: what was the ideal funding option to best position Biro for the growth ahead? This case discusses the context of high growth startup & technology businesses, explores venture capital and debt fundraising, and challenges students to evaluate the strategic and financial merits of each, as well as the long-term implications on the business.

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