Runway Capital's David Spreng Discusses his VC Journey

David Spreng of Runway Growth Capital - Podcast Transcript

Scott Orn:	Hey, it’s Scott Orn at Kruze Consulting and welcome to another episode of Founders & Friends, and before we start the podcast let’s give a quick shout out to Rippling! Rippling is the new cool payroll tool that we see a lot of startups are using. Rippling is great for your traditional HR and Payroll. They integrate really nicely, but guess what, they do another thing, they integrate into your IT infrastructure. They make it really easy for when you hire someone to spin up all the web services on their computer, which sounds kind of not a huge deal, but actually, we did a study at Kruze and we spent $420 on average to just getting a new employee’s computer up and running and their web services up and running. It’s actually a really big deal and saves you a lot of money. We see a lot of startups coming in to Kruze now using Rippling, so, please check out Rippling, great service, we love it, I think we have a podcast with Parker Conrad, so you can hear it from his own words, but we’re seeing them take market share so, shout out to Rippling, and now to another awesome podcast at Kruze Consulting, Founders & Friends.
Singer:	It’s Kruze Consulting, Founders and Friends with your host, Scottie Orn.
Scott:	Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting, and today my very special guest is David Spreng of Runway Capital. Thank you, David.
David:	Thank you Scott. Great to be here.
Scott:	So it’s been a pleasure. We met pretty recently, but it turns out we’ve been living kind of parallel lives and you have a ton of venture capital and venture lending experience. And so, I was like, normally I talk to new people and I’m like, “Oh, I don’t know if this person knows what they’re talking about.” With you, it’s completely different. You are so knowledgeable, I found myself nodding vigorously when we were talking and so I wanted to have you on the podcast so you could talk about Runaway Capital’s venture debt product.
David:	Well, and vice versa. Our first conversation was like talking to somebody from the same background. It was great.
Scott:	Maybe you can start by retracing your career here and then get to the, how you had the idea for Runway Capital.
David:	Yeah, absolutely. So, I started out my career in investment banking working at Solomon Brothers in New York, on Wall Street. Same time as Michael Lewis was there writing Liar’s Poker, so it was a great time.
Scott:	I have a great story about that. But yeah, keep going. We’ll do at the end.
David:	So and then I ended up migrating from there into the asset management world where I, at a pretty young age, was the head of strategy worldwide for Lloyds TSB Bank in the UK. And my boss at the time suggested, hey, if you ever want to run a money management firm, which I thought I did, that you need to run money. You can’t just be a strategy guy. And so, I looked around the firm and what I found was venture capital. So, I created a venture capital business for them. Came out here to Silicon Valley and found my way under the wing of a guy who’s super experienced in venture. And he showed me the ropes and I started making venture equity investments. First one was in 1989, so a long time ago. I got very lucky and backed some great entrepreneurs and had a good run in VC, got on the Forbes Midas list a bunch of times and in the process, met some guys who are now running top venture firms, and that’s an important part of what I do today. But along the way, I observed that there were a couple of ways to participate in this ecosystem, and one of them was on the lending side. So, in 2010, we started a firm called Decathlon Capital. That’s now the largest revenue-based loan provider.
Scott:	Oh, I didn’t know that.
David:	Yep. Fantastic firm. And my two co-founders are still doing that. But in 2015, I saw the opportunity to marry what we were doing at Decathlon with some of the really interesting stuff that was happening in Silicon Valley. And the Decathlon model is mainly non-sponsored small companies outside of Silicon Valley. And being here and seeing what was happening, I really wanted to continue to participate in that. So, we put the two together and created Runway, and we were very fortunate to find Oak Tree Capital Management down in L.A. As an anchor investor and sponsor, and raised that fund in 2016 and made our first loan in Q1, 2017.
Scott:	Amazing. I didn’t, Oak Tree was one of your big… That’s a very, very smart group of people down there.
David:	They’re super smart and great partners.
Scott:	I used to read their investment, they’d have like an annual investment letter. It was just incredible.
David:	So, the guy, Howard Marks, who was one of the co-founders and writes these incredible letters, still does it today, but a very, very interesting smart guy. And that is true across the firm. We couldn’t be happier with them as a partner.
Scott:	And you said something really interesting there where you started in venture capital for, it sounds like 30 years, had some big wins. And then saw the debt side of the equation. And for a lot of the listeners out there, people don’t understand or know how deep the debt pool is of capital in the startup ecosystem. We’ve actually done a survey where it just came out maybe like a month ago or two months ago, but it’s about a $10 billion market now, incredible, right? Is that what you saw and got excited about the opportunity?
David:	Yeah, but I actually saw it as relatively small. It’s bigger than a lot of people think, but it’s dwarfed by the amount of equity.
Scott:	Totally.
David:	So, if you look at venture equity, that was 130 billion last year and it’s probably going to be close to that again. And at 10 billion, the opportunity is huge. So that was really what we saw.
Scott:	Actually, the way you talked about that makes total sense to me because typically our clients will ask us, what’s the right leverage ratio for a startup? And I’ll say something like 25 to 40% of equity. And so by doing that math you end up with like a $25 billion dollar, even 40 billion dollar-
David:	Potential theoretical mark.
Scott:	Yes, so you have a long way to go, that’s really interesting. So, you saw this, you were familiar with it from being a board member and a VC and said, hey, this looks like a pretty interesting market opportunity for me.
David:	Absolutely.
Scott:	Was it a couple kind of a specific experiences with some of your existing portfolio companies where you really saw the instrument work for them and saw them extend their runway and maybe hit an IPO or reach cashflow break even or what was the aha moment for you?
David:	Well, so there was a lot of that as a VC where, like most VCs today, it’s become a common and accepted as a best practice to use some amount of leverage as you grow the company. The real eyeopener for me was in the opportunity to use debt as a supplement or complement or alternative to equity in companies that weren’t necessarily perceived to be the home runs. So, venture guys swing for the fences and not even a home run, but a grand slam or a splash it as we call it here. And that’s where they put their dry powder. So, the companies that are, for lack of a better word, good but not yet great, kind of getting neglected. And there’s a huge opportunity to fund those companies. And in the debt world, you don’t need 10 or 20 or 30 or 40 times your money to have a great return. So, that was one big eye-opener. And then at the same time, a lot of companies were kind of saying, we don’t want to go the traditional venture route, we’d like to find a less dilutive model to build our business, and a debt can fill that role as well.
Scott:	I want to talk about both of those because I think they’re both so accurate. What a lot of founders don’t know is that the VCs have a real focus on the top 20 or 30% of their portfolio. And we say, that’s where their dry powder goes. That means those are the deals they want to force more money into or participate in every round and use their dry powder. And there’s a whole swath of like another 30% of the portfolio that’s doing well, but maybe as in a 20X or 50X, and those companies deserve funding. And that’s why I think your… We’ll get into your instrument in a second, but I think that’s a really smart way of looking at the world.
David:	Yeah. Well, so I saw a stat yesterday that two and a half percent of venture backed companies provided virtually 100% of the return. So, if you’re not in those two and a half percent, you’re not in the top quartile. And so, it makes sense for VCs to swing for the fences, I get that. But not at the complete neglect of these other companies that deserve to get funding.
Scott:	Yeah, I love it. And then the other thing you were talking about was what return profile that a fund needs. You don’t need the 5X on the fund, it would be nice if you get lucky on a couple, that would be amazing. But you’re looking at probably what? A 3X or two and a half X or something like that?
David:	Not even that. Venture debt firms generally are pricing for mid-teens, and if you get lucky and the warrants are really successful, you’ll get 20, and you can trash that to an equity investor that at a minimum wants 30 or 40%. So the return hurdle’s much lower. The difference is we can’t absorb losses because we don’t have 5 and 10X to make up for it.
Scott:	That’s something that for entrepreneurs to understand when they start working with venture debt fund is they’re typically, they’re trading some upside for some downside protection. And not everyone understands that because they’re coming from an equity orientation. But that’s actually really important for a lending fund.
David:	Correct.
Scott:	Now, one of the reasons I want to have you on podcast, you guys are doing some really interesting deals. They tend to be bigger than kind of my experience. I used to be more series A, series B, but I did a couple of later stage ones. But maybe talk about your target check size and your target spot in the market.
David:	We focus on later stage. So, our check sizes are 10 to $50 million and we could go even bigger, but right now it’s 10 to 50. And so that is aimed mainly at companies that are really well along in being established. So, our portfolio average revenue is 30 million. Average venture equity raised is almost 80 million. And one shocking statistic is the average age of the company’s 14 years.
Scott:	Oh my gosh, wow. Are these companies that have outgrown their venture syndicate where the syndicate’s not writing a whole lot of new checks?
David:	In some cases, yes. But one of the big differences between what we do and the early stage stuff is, I would say early stage venture debt always should be a compliment to equity, never an alternative. In late stage, you really can just use debt. So, a use case for us that’s very often the situation is a company needs 25, 30, 40 million dollars to get to cashflow positive, an M and A exit, possibly an IPO. That’s rare, but occasionally. And there’s just no reason to use equity in that situation. And if you think about if the company’s 14 years old and Benchmark or Sequoia did the series A, 14 years ago, that fund is no longer even investing. So, they’re well aligned with the entrepreneurs and trying to minimize dilution. So, it’s a great fit in that situation. Also, if you’re doing an acquisition, you’re going to need some capital to do that. And if the other big use case today is just preparing for an unknown economic future, and whatever’s going to happen, the old adage about raising money when you can, now is the time to do that, and beefing up your balance sheet in anticipation of an economic downturn, or this venture consolidation that we know happens at the end of every cycle. And whether you’re a buyer or a seller, you don’t want to do it with no cash on your balance sheet.
Scott:	You said about eight really smart things there I wish I could [crosstalk 00:11:17].
David:	That’s a record for me.
Scott:	So, the beefing of your balance sheet extremely timely, because we actually sent out in our newsletter yesterday, or probably the time when people will hear this, it’d be like two weeks from now, but he said, “Hey, if this is what the tech recession looks like, here’s what you can do.” And because so many times, advisors or people that don’t have a vested interest in preparing the entrepreneurs for that recession, like for whatever reason. And so, we gave them a list of things that they could do, including looking at venture debt to help extend the runway. I’m a huge believer in what you said, which is, get the money on your balance sheet before the music stops. And I don’t think we’re looking at anything like it was in 2008, 2009, 2010, but it’d be nice to have a little extra money if things keep going sideways. And so, are you seeing an uptick in demand over the last six months a WeWork thing plays out and as the SAS IPOs haven’t done very well, what’s your feeling on that?
David:	Yeah, a big uptake in demand-
Scott:	Interesting.
David:	Both just to buy insurance, if you will.
Scott:	Yeah, but I’m a huge fan of that.
David:	But we’re also seeing people moving away from lenders that they fear may not act in a steady way.
Scott:	That’s a very politically correct way of saying that. I know exactly who you’re talking about. There’re a few funds out there that I would be very nervous about.
David:	Yeah, and certain banks that are known for coming in and out of the market when based on economic conditions and that’s the last time… The worst time to get a call from your bank saying, we’re pulling your line, is in a downturn.
Scott:	I remember at Lighthouse Comerica, I got out of venture debt for like two years. And felt like a call from every single one of their portfolio companies trying to get us refinance. And as a lender, when you get those refinance calls, you’re like, what do I don’t know? There’s a really bad adverse selection problem there.
David:	Correct.
Scott:	Yeah, so doing it now is very smart. The other thing you said, which I loved was, being an acquirer instead of being someone who is acquired. Maybe talk about some of the stuff you’re seeing there, where people are maybe, I don’t know if they are, but anticipating a slight downturn and they want to beef up their balance sheet to be able to buy other companies.
David:	Oh, absolutely. So there’s this whole, eat or be eaten kind of mentality, and for the bigger venture backed companies that have strong backers, debt and equity, they’re looking to take advantage of an economic downturn and by smaller competitors, or they may be acquired from a big corporate guy. Either way, having a strong balance sheet is really important.
Scott:	I totally agree. And that second example you said about when you’re getting acquired, even your company, they’re big companies, but they’re getting acquired. One of the nice things about taking debt as a substitute instead of new equity is, every time you raise new equity, your price is going up, and that new investor wants a 3X probably. And so, you’re not resetting the valuation, which means the company by taking debt, can actually sell themselves for a more reasonable amount of money but still get the same return. The investors still get the same return, which is really important. That’s one weakness I’m seeing in the market right now, where a lot of founders are rushing into these huge equity raises at billion-dollar evaluations, when they’re not even close to being there yet, and they don’t know this because they haven’t lived it yet, but it’s limiting their exit potential because the venture capitalist who put that money in, is not going to sell for… They don’t want the liquidation preference, they want to keep running it out and see and drive the big valuation. Are you seeing that? Like companies come to you and say, I don’t want to reset. I don’t want a huge valuation uptake if I don’t need it because I won’t be able to sell myself? Or is that something that people are not thinking about yet?
David:	More often people are not thinking about-
Scott:	Yeah, maybe I’m too old school or too conservative.
David:	People are very attracted to that large valuation number, and it can get you in trouble. And another use case for us that’s very common is somebody who raised money at a value that’s too high and they need to buy time to earn back into that value. They don’t want to do another price round because it’ll probably be a down round.
Scott:	How do you underwrite those situations? I’m just curious. Because on the one hand, it could be a great opportunity for you, on the other though, if you get into bed with the company with a valuation too high, it can make it so you get stuck too. How do you think about those situations?
David:	Well, as you know, we’re enterprise value lenders, so we’re always lending relative to the enterprise value. And so, establishing enterprise value is one of our critical core competencies, and we never use the last round value to-
Scott:	Anything.
David:	Yeah, I mean it’s a data point, but and so doing the deal becomes more complicated, especially on the warrant side when the last round was just clearly too high. We like to lend no more than 20% loan to our value, or OLTV. So, we’ll do the normal valuation and then we’ll just have a conversation about how we price the warrants. And if we can’t agree on value, then we’ll just put in something like 2X.
Scott:	Oh, if get a 2X return on the warrant. That’s actually really smart. Because we saw this, and again we were doing earlier stage stuff, but we would get stuck where a company can never get additional capital after us if the valuation was totally our work. And then you’re looking at a recap, but in recaps the lenders tend to come under pressure too. At least at the earliest stage, maybe your stage, maybe there’s some calculus you’ve made. There’s enough enterprise value there where you just hold firm and say, “Hey, we’re not taking a haircut, or anything like that. Let’s recap this company.”
David:	So, we have not yet been asked to take a haircut, and keep in mind, if we’re doing our job and we’re really pretty accurate in lending no more than 20% loan to value, there’s a pretty big cushion. I mean it can happen, and I’m certain at some point we will be asked to convert a portion to equity, but that has not happened yet. And the reason we favor the late stage is one, we’re underwriting the business, not the sponsors. And then two, there’s just a lot further to fall. And if you do a good job monitoring, you can see when things are starting to go off the tracks and put in place a program to avoid a complete restructuring. We have had companies do a zero-pre-money recap on the equity, but it didn’t impact us.
Scott:	Because there’s so much enterprise value that they know that you could sell the company if you need to.
David:	Correct. It’s because it’s a 12- or 13-year-old company, and some of the venture guys have dry powder and some don’t. And when it comes time to continue to support the company, they’re like, okay, it’s a pay to play.
Scott:	Yeah, exactly. Maybe talk a little bit more… We’ve covered some of these already, but the differences in earlier versus late, because again, my experiences are earlier venture debt, but you looked at this market in 2010 and maybe 2015, saw this was pretty attractive at the late stage.
David:	Yeah, well, so the mega trend of course is companies staying private longer, so they’re accessing the private market, both debt and equity as an alternative to going public. We saw Peter Thiel’s announcement this week. I mean that’s definitely a trend that’s continuing even with this little kind of temporary [inaudible] and IPOs, which may be now dampened with the recent results. But nonetheless, even if we have this level of IPOs, it’s nothing. I mean it’s still 100 IPOs. It’s nothing compared to the number of venture-backed companies that are out there. And there’s plenty of capital for companies to continue to grow, and to even get liquidity for early stage investors. So, that’s the mega trend that we’re supporting. And then in the late stage, the idea that debt is cheaper than equity is just a fact.
Scott:	The people who are doing the late stage tend to be more numbers driven, financial oriented. And when they put money in a company, they are modeling out a certain exit. While I find the earlier stage, investors are falling in love with a product, a founder, believing this can be a big market opportunity but like, it makes total sense to me, the late stage equity investors would love debt too. Because they’re preserving their ownership-
David:	For sure.
Scott:	… In the same way that… Yeah, it makes so much sense. There’s something that you said in terms of when you guys look at a company, you really underwrite it. In a way, I feel like you’re doing the company a favor because you’re doing your homework. But let me talk about your underwriting process and how you evaluate a startup or late stage startup.
David:	Yeah, of course. One of the things that we pride ourselves in is that all of our team that interfaces with borrowers, they all have direct venture equity experience. So we’ve all been in the trenches, helping entrepreneurs build their businesses. We understand that things aren’t always straight up into the right, it’s a bumpy road. We need to have a steady hand and not panicking when things get choppy. On the other side, our credit team, hardcore, all in New York, they come out of [crosstalk 00:20:16], they’re serious credit guys. We do real underwriting, and one of the things that we do that I think is unique is that we underwrite the loan separate from the company.
Scott:	Can you say more about that?
David:	Well, so you don’t want to either have a good company and a bad loan, or a bad loan to a good company, neither one is great. You need to have both in sync. So, we’ll underwrite the quality of the company, all of the things that you would expect to look at. And then on the other side, we’re looking at the loan in how long is the IO? Are there covenants or not? All the kind of stuff that would go into making a good loan. And put those two together to come out with a pricing formula. We have a couple special products that I can talk about that offer entrepreneurs creative financing solutions to meet their specific needs.
Scott:	I’d actually love to hear that.
David:	Okay, so I’ll come back to that. But the most important thing is that by doing real underwriting, we understand the risks in the company. And if that company has a bump in the road, and perhaps there’s a default, and I’ve heard from some of the placement agents that 80% of venture debt deals go into default. So just expect it. It’s part of… So, you’re going to have some kind of a restructuring. So, you want to make sure as a borrower, that your lender knows, and that you know how they measure risks. Because if things don’t go as planned, and they can’t measure risk, what are they going to do? Panic, and that’s the worst thing to happen at that time.
Scott:	I cannot emphasize that last point enough. Because the new entrance in the market especially will come in thinking this is a great asset class to lend into, and you can get great returns on it. And they don’t want to do the diligence because they don’t want to upset or lose deals. And the borrower thinks that’s great. Just look how easy this money was to get. But then when things go bad, they are the first to clamp down and they don’t necessarily care about the reputational risk or being a longterm player. And it makes life really, really difficult for the startup. So much so that a reputable lender who knows what they’re doing, like you, doesn’t really want to come into that situation and refinance it out. You can actually, in your selection of a lender, actually really hamstring the company. And so as a borrower, you want the lender to do diligence, it’s actually in your favor.
David:	Well, we find that they appreciate that. So, when we go in, we’ll spend a day at the company and meet every single senior executive, we’ll go through every element of their business and they really appreciate that we take the time to do that. And oftentimes, they’ll learn something in the process, and then we can just be a better partner. The more we know, we’re a better partner.
Scott:	And the stormy seas is when the better partner are super-duper important.
David:	Yeah, so on the two products that we’ve created, one is called ROSE, the Runway one-stop enterprise loan, which is a combination of term loan and revolver.
Scott:	Oh, interesting.
David:	So, for a borrower that has an accounts receivable or inventory piece to their business, and they could get a better rate from a bank, but they don’t want two have to borrowers just because of inter-creditor stuff and all that, we can do that ourselves.
Scott:	That was actually something I saw in the early days of this cycle going up. We were doing a lot of deals with Comerica and SVB, in that they would be the senior and we would be the junior, and provide kind of more flexible, bigger dollar amounts. That’s great, you guys have put it all under one house.
David:	Yeah, and the banks aren’t really opposed to it because at the end of the day, the banks really love the deposits and all the other fee generating business that comes with it, and they’re not really super keen on doing big term loans, so if we’re going to do a $25 million term loan and there’s a $5 million AR facility with it, you just put it in the rows, the bank gets the deposit, they get the credit card, they get the Forex and everybody’s happy.
Scott:	That’s really cool. And the inter-creditor agreement, just to go back to that for one second, that is where there traditionally is a lot of fights between the two lenders, especially if things go sideways. So, you may have a lender like yourself who’s open to working with a startup when things get rough, banks traditionally don’t really… That’s a red flag in their credit portfolio, that the regulators are going to see. And so, they are not as keen to work with a startup, and so having under one roof actually really helps things.
David:	It does. And if somebody prefers to have the bank do the AR, we have a standard inter-creditor with SVB and other banks, and we can do that. It depends on what’s best for the borrower.
Scott:	That’s really cool. The second product.
David:	The second one is called the Eagle.
Scott:	You guys are good at branding for [crosstalk 00:24:54].
David:	These little acronyms. And you’ll love this one. So, it’s the extendable adjustable growth loan for enterprise.
Scott:	Nice.
David:	And everybody, whether it’s you and I or a startup, we all think our credit’s going to be better in two years than it is today, and we don’t want to lock into a three- or four-year interest rate that’s higher than we think we should pay. And we’re really big on minimizing churn in our portfolio. When we find a good borrower, we want to keep them on the books-
Scott:	That’s really smart.
David:	… Even as they become a better credit. And so what extendible means is that based on achieving milestones, we’ll extend the IO, we’ll extend the term adjustable, we’ll adjust the rate down based on them becoming a better credit and it’s all pre-wired.
Scott:	Is there like metrics that you use to do that?
David:	Yeah, there’s a grid, there’s a pricing grid and then it’s based on milestone. So pretty much it’s a deal like if you do what you say you’re going to do, you become a better credit and we’ll change your pricing accordingly.
Scott:	I love that. Yeah, because that’s actually, at lighthouse, that was one of the things that was hard for us in that they would grow out of us. We felt like we should do another deal, but sometimes they would be able to access cheaper capital or something like that. So, that’s great. You guys have built that into your product.
David:	Great. Another thing that borrowers, need to be aware of and kind of the Eagle was created in response to is that, the IO period, the end of the IO period-
Scott:	Interest-only period.
David:	Interest only period becomes a natural time to decide if you want to stay married. And after 18 months for most companies, especially startups and even in these later stage guys, they’re not at a point that they can amortize. So, you either have to extend the interest-only period or refinance. So, for some lenders that like churn because they like the backend fees, the prepayment penalties-
Scott:	I didn’t think about that.
David:	They don’t want to extend, it’s just no, they’ll refinance us. And we have the view that like almost any other business, it’s cheaper to keep a customer than get a new one. So, if we need be, we’ll extend the IO, we’ll drop the rate, we’ll do whatever we have to keep you in the portfolio.
Scott:	And that’s great that you have a capital base that can support that. Because like sometimes, lenders, especially fund lenders want to recycle the capital because they don’t have an elastic fund base. And so, it sounds like you guys have the capital to back that up.
David:	We do. So, and that’s the beauty of a BDC and several players in this market are BDCs, they’re permanent capital vehicles. So, we don’t have to worry about the end of a fund or anything like that.
Scott:	That’s the business development corporation, which is a pretty big innovation in the venture lending world because it allowed… Traditionally, lenders had been either banks or dedicated funds, like how Lighthouse was, where we have MIT as our investor. Now, you’ve helped pioneer the BDC structure, which is permanent capital. You kind of get the best of both worlds, right?
David:	We didn’t pioneer it. Hercules went public in 2004-
Scott:	That’s right Applesauce.
David:	[crosstalk 00:27:49]. And there’s about 50 publicly traded BDCs today. Three of them are in venture debt, Hercules Triple Point and Horizon. And we’re a BDC, but we’re not traded. So, we file with the SEC, but we don’t trade publicly. And if you went and look at those 50 publicly traded BDCs, it’s names like Carlyle, TPG, Apollo, KKR, mainly focused on doing big leverage loans, and then those three venture debt guys.
Scott:	Yeah, it’s been a great vehicle for also, there’s a lot of individual investors who buy those kinds of publicly traded stuff because they like the yield.
David:	And that’s an important point on BDCs. I know that’s not the topic of your podcast, but BDC started out being focused at retail investors and when we did it, was the beginning of the shift towards institutions, and our fund is almost all institutional investors.
Scott:	That’s amazing. That’s a really good insight. Because when we were doing Lighthouse, we were trying toying with BDC, but it was still fairly new for us, so we didn’t quite understand it. And I think to your point, a lot of institutions, they didn’t know how to invest in the BDC. They were used to a dedicated fund structure in a different way, so that’s really cool. We could talk all day. I love what you’re doing. I’m actually a believer that the market’s getting a little soft right now. Is there something that, a diagnostic that startups and late stage startups especially can look in the mirror and say like, now’s the time to reach out to Runway, or I should really be thinking about building up my balance sheet a little bit? Like what should they be thinking of those founders and startup CEOs as they decide whether they reach out to you or not?
David:	Well, I think they should definitely reach out and almost in any case, because having a conversation can’t hurt, knowing what your options are, can’t hurt. And buying insurance, if you want to call it that at this point in an economic cycle. Whether you’re fearful about where it will go, or you’re super aggressive and you’re just waiting for your competitors to stumble in and you’re going to pounce on them, you need to have capital to do that. We all know in an economic downturn who has liquidity is going to win the day. So, there’s a reason that we’ve raised more money, our fund is now significantly larger and we have a lot of resources available. And in partnership with Oak Tree, it’s almost a bottomless pit. So I would encourage anybody who’s thinking of raising capital, whether it be debt or equity, to explore it. And one thing we didn’t talk about is we do both sponsored and non-sponsored. So sponsored obviously being you’re backed by a VC, but on the non-sponsored side, same thing, 10 to $50 million, companies that are looking to grow. And in that case, they have never taken outside equity. The difference is that on the sponsored side, the companies always still not yet cash flow positive. The non-sponsored side, because they don’t have deep-pocketed equity, they need to be really closed to cashflow positive, because that’s going to be the source of repayment.
Scott:	For sure. And I just want to just emphasize what you said for the listeners. You are a professional investor. You’ve been doing this for 35 years. You have made a decision to beef up your balance sheet going into this kind of time. And so I think sometimes people talk the talk but you are actually demonstrating through your actions that there is an opportunity coming that people should prepare for a rainy day, so I love that. This has been an awesome podcast. Can you tell everyone where to find Runway Capital and how to reach out to you?
David:	Of course. So runwaygrowth.com, and my personal email is DS for David Spreng @runwaygrowth.com and all the other folks are listed on our website. And please reach out to anyone, we’re looking forward to talking to you.
Scott:	I love it. Thanks for the podcast, David. You guys have a really unique role in the ecosystem. I love it and I look forward to, when our clients are getting big, I can send them over to you, and they can get some money for a rainy day. I really appreciate it.
David:	Thanks Scott, it’s a pleasure. (Singing).
Speaker 2:	It’s Kruze Consulting, Founder and Friends with your host, Scottie Orn.

David Spreng of Runway Capital discusses his journey from banks to venture capital to venture debt

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