The investor proposed venture debt of Rs 40 lakhs with a gross interest payout of Rs 4 lakhs over 12 months.
When I dug deeper the true cost was revealed as an IRR of 20 % per annum plus a 10 % equity‑warrant component.
I used Claude.ai to calculate the IRR and it returned the result in 5 seconds.
I wrote about how most founders misunderstand venture debt and fall into hidden traps.
under 1% of founders actually knew what debt is and how to use it efficiently.
most venture debt agreements require you to maintain 6 months of runway.
So why would you take it for runway extension when there's a clause that actually reduces your usable runway by 6 months?
The worst thing you can do is take on debt without product‑market fit.