The Equity Round That Never Happened
In early 2020, Simon Turner, the co-founder of retail sales enablement platform Myagi, was preparing for a familiar ritual: the significant equity raise. The company had traction, a clear mission to digitize the relationship between brands and retailers, and a plan to scale.
Then, in March 2020, the global markets froze. The COVID-19 pandemic disrupted retail supply chains and sent venture capital investors into a defensive crouch. For many founders, this was the “death valley” scenario: a signed term sheet evaporating or a valuation getting slashed in half overnight.
However, Myagi faced a paradox. While the capital markets were icy, their actual business demand was heating up. With physical sales calls cancelled worldwide, brands desperately needed digital ways to train and connect with retail staff. Myagi experienced its best six months of growth to date. The company had the metrics to justify investment, but the equity window was effectively nailed shut for the terms they wanted.
The Decision: Avoiding the “Down Round” Trap
Turner and his team faced a critical fork in the road, a decision matrix that many operators navigate during market corrections:
- Option A: Raise Equity Under Duress. Accept a lower valuation (a down round) to secure cash. This would dilute the founders and early employees significantly and potentially add onerous liquidation preferences to the cap table.
- Option B: Slow Down. Cut burn, stall growth, and fund operations solely through cash flow, risking the opportunity to capture the surging market demand.
- Option C: Leveragel Private Credit. Use the company’s growing recurring revenue to secure non-dilutive capital.
In early 2021, Myagi chose Option C. Instead of selling a permanent slice of the company at a momentary discount, they secured a $2.5 million investment facility from TIMIA Capital. The structure was revenue-based financing, a form of private credit where capital is advanced against future recurring revenue streams.
The logic was strategic: the capital would fuel specific revenue-generating activities (customer acquisition and product enhancements) without altering the ownership structure or board control.
The Outcome: A Clean Exit
The danger of debt is leverage; the power of debt is also leverage. For Myagi, the bet paid off. The $2.5 million injection allowed them to bridge the gap between their 2020 uncertainty and a mature market position.
By using debt, Myagi avoided the pressure often associated with venture capital to “swing for the fences” with unsustainable burn rates. They focused on efficient growth. Over the next two years, they invested the capital into cementing their market leadership.
The strategy culminated in a successful exit. Seeing the strategic value in Myagi’s network and technology, Rallyware, a performance enablement platform, acquired the company. Because the founders had not diluted themselves during the 2020/2021 crunch, the exit math was likely far more favorable to the common shareholders (founders and staff) than if they had raised a desperate Series B.
As noted in the case study by TIMIA Capital, the debt facility acted as a bridge to this acquisition, allowing the company to reach the finish line on its own terms.
The Lessons: Debt as a Strategic Bridge
The Myagi story illustrates a fundamental principle of capital structure: Equity is for risk; Debt is for execution.
Founders often default to equity for all capital needs, but equity is the most expensive form of capital when a company is successful. Myagi’s use of debt highlights several key lessons for operators:
- Preserve Optionality: Venture capital often comes with a “growth at all costs” mandate that restricts exit options. A VC firm needing a 10x return might block a solid strategic acquisition that would make the founders rich. Debt providers primarily care about repayment; they rarely block exits that clear the debt hurdle.
- Match Tenor to Purpose: Myagi used the capital to invest in activities that would boost revenue and market position over a 12-24 month period. This aligns perfectly with the amortization of a debt facility. Using debt for long-term R&D (with uncertain ROI) is dangerous; using it for sales expansion (with predictable ROI) is efficient.
- The “Bridge to Exit” Strategy: In a volatile valuation environment, debt can bridge a company to a better liquidity event. By not setting a low valuation mark in 2020/2021, Myagi avoided the “valuation overhang” that traps many tech companies today.
Summary
Myagi’s journey from potential equity dilution to a clean strategic exit serves as a blueprint for founders facing similar market volatility. By decoupling their operational capital needs from the equity valuation market, they maintained control and maximized the value of their eventual exit.
