Your Second Customer Is a Lender

Back in March we hosted our Vantage Points ‘Robotics Investor Summit’ in London. One of our partners for that event was Tangible Finance, whose mission is to be the capital stack co-pilot for ambitious hardtech companies — helping founders understand, then structure, non-equity financing options.

Debt has long been misunderstood by the venture community, which has focused mostly on underwriting pure software. Tangible are working to change that, and it matters more every quarter as VC capital flows into hardware.

They’ve now published Hardtech’s Debt-Raising Map. We asked them to write the companion piece for the other side of the table: what debt-readiness means for those of us buying the equity.

So what’s the FOV view?

You might wonder why we, a venture investor, are deep-diving on debt and pushing our founders toward it. Dilution is our product. We buy ownership, and we’d rather buy it cheaply than expensively. So why argue for less of it?

Because we don’t think it’s about how much equity a company sells. It’s about what that equity buys. Equity priced against technical risk is exactly what venture exists for, and everyone is well served by it. Equity spent on the thousandth identical unit is something else: the priciest capital available paying for something a lender would have funded at a fraction of the cost. That trade destroys the return for the founder and for us in the same motion.

It also crowds out what equity is actually for. Every euro spent on the hundredth identical robot is a euro not spent on the next product, the go-to-market, the team that builds both. And the arithmetic gets worse as the company scales, because funding deployment from the cap table means coming back for ever-larger rounds at valuations that eventually outrun what any venture investor can reasonably underwrite. Somewhere around the hundredth unit, that price stops existing. So the companies most reliant on equity to fund their assets aren’t simply the most diluted. They’re the most likely to die.

We’re not arguing for a smaller slice of the companies we back. We’re arguing that the slice we buy be backed by the technology and the team, and that the steel be financed by someone whose whole business is financing steel.

What follows is Tangible’s piece, written for fellow investors and best read alongside their Debt-Raising Map. Let us know what you think.

A guest post by Tangible Finance

Introduction

We’re at the start of one of the largest reallocations of private capital in a generation, and the companies that will define it are being built out of atoms. Here’s the part most investors miss: whether a company can raise asset-backed finance, more than the product itself, is becoming the thing that separates the ones that compound from the ones that stall. The best of them are already scaling on capital their competitors don’t know exists.

This piece is meant to arm you. Debt-readiness is now an equity question. Every euro of deployment a company funds with debt is a euro of your ownership that survives to the exit, and every round after it gets easier to assemble. The funds that learn to pick for this, and to push for it, will own more of their winners. What follows is how we, sitting in the diligence rooms on both sides, tell the contenders from the pretenders.

I. The supercycle, and why it changes your selection problem

Capital is moving from software to the physical economy. As AI thins the moats vertical SaaS once enjoyed, the durable returns are migrating to robotics, energy, advanced manufacturing, and the infrastructure beneath them.

Supercycles like this are never funded by equity alone. They turn when asset-backed finance arrives to make deployment viable at scale. Created in 1919, GMAC (the General Motors Acceptance Corporation) turned the car into a financeable receivable. The mortgage built the housing market. Aircraft fly on leases, not on airline balance sheets.

What you’re funding is physical, so the financing problem is structurally different from the SaaS playbook you were handed. You wouldn’t let a company design its hardware and contracts without the customer in the room. In hardtech the capital markets are the second customer. So when a founder says they’ll figure out financing later, read the flag. Later means diluted.

The capital has already arrived to meet them. Private credit has crossed two trillion dollars and is climbing toward four and a half by the end of the decade, and its fastest-growing slice is asset-backed finance — the instrument built to fund exactly what hardtech builds. The buyers exist. The only question is which of your companies is designing its cashflows, processes and collateral for them, and which is still planning to sell equity to buy steel.

II. Equity and debt must be married, and that tells you what to back

Software hit $100M of recurring revenue on a few hundred million of equity because its marginal cost was near zero. Atoms can’t. Funding each unit of deployment with the priciest capital on the cap table is value destruction, plain and simple.

The objective is the lowest blended cost of capital at each stage. Over time, cheapest cost of capital wins. Venture stays essential, but its job in hardtech is to retire technical risk and get the company to the point where debt can do the heavy lifting.

Picture the journey on two axes: technical risk falling, contracted traction rising. As the first drops and the second climbs, the optimal mix should shift in lockstep, equity-heavy to debt-heavy. Equity buys the inflection. Debt carries the scale.

What this means in diligence: back companies whose capital mix is built to shift, and whose every financing leaves them positioned to raise cheaper and more flexibly next time. A company with no credible path to debt is a company that will keep coming back to you for the priciest money it can find. And not all debt is equal, either. The wrong structure can cost more than the equity it was meant to protect. Getting it right is a craft, not a checkbox.

III. Timing: it’s about repeatability, not funding rounds

If there’s one idea here to carry into your next board meeting, it’s this one. The timing of debt is not a question of which equity round a company is on. The instinct to bolt a facility onto the last raise, the way venture debt usually works, is precisely the thinking that keeps companies small. Round-tied debt scales with your equity and therefore caps out with it. The capital that funds real scale is unlocked by something else entirely.

Sum it up in one word, and the word is repeatability.

• Debt doesn’t underwrite a story or a round. It underwrites a unit it can watch repeat. The bespoke, first-of-a-kind asset belongs to equity. The thousandth identical unit — built to a known cost, performing to a known curve, sold on a known contract — belongs to a lender, who’ll fund it gladly.

• Repeatability is what lets a lender stop underwriting the company and start underwriting the asset. That shift is the whole game. It moves a company from corporate risk, priced expensively, to asset risk, priced cheaply, and it lets a facility scale without scaling your dilution.

• So the milestone that matters isn’t the Series B. It’s the moment a company can say: we’ve done this many times, here’s the cohort data, here’s the contract template, and the next unit looks exactly like the last. That’s the event debt is waiting for, and it almost never lands neatly on a priced round.

• This reframes the founder’s job, and yours. The work isn’t to time a raise to a milestone on the equity calendar. It’s to define the repeatable unit early, standardise it, instrument it, and build the company so that when repeatability arrives it’s legible and financeable: clean contracts, per-asset data, structures that lift into an SPV without a year of legal surgery.

For you as the equity investor, repeatability is the timing question worth asking in the room.

• Ask what the company’s repeatable unit actually is, and how close they are to proving it. A team that answers crisply has understood its second customer. A team that fumbles is years from scalable debt, however large its last round was.

• Push your companies to define and standardise that unit sooner than feels necessary. Repeatability is engineered, not stumbled into, and the choices that enable it are cheap at pre-seed and expensive at Series B.

• When you find repeatability proven, or nearly so, you’re looking at a company about to unlock capital that isn’t yours to provide. That, not the next markup, is the inflection that should move your conviction.

A closing word on psychology, because it’s the real obstacle. The fear of debt, and the quiet preference to push it down the road, isn’t only a founder’s instinct. Plenty of investors share it, and would rather write another equity cheque than ask a company to do the harder work of becoming financeable. That’s a mistake, and it’s worth calling one. The bar for debt is high; we won’t pretend otherwise. But a high bar is exactly why debt has to be the lens a company sees itself through from day one — the destination it’s built toward, not a bolt-on fastened to a finished business. Bolt-ons don’t work. Neither do founders who wave a hand and promise it’ll all be fine. The companies that win here treat debt-readiness as the goal, and the investors who win here expect nothing less.

IV. What the wrong sequence costs — you, and the whole category

The fastest way to see the value of sequencing is to watch a good company hurt itself without it. We see it constantly: real technology, real customers, real demand, undone by a single avoidable decision. They bake their capex into an equity round.

Consider the pattern. And it is a pattern, not an exception.

• A Series B company needs sixty million. Forty-five of it is capex: the first plant, the first fleet, the first thousand units bound for customer sites. With no debt access built in time, it raises all sixty as equity.

• The round is now too big to fill. Fewer funds can lead a raise that size, diligence drags, and the company spends nine months selling a story it should have spent building a business. Plenty of these rounds simply never close, and the company stalls, or dies, with a working product still in the ground.

• Equity is the most expensive money on the table. Funding depreciating physical assets with it — assets a lender would have financed in the low teens or below — quietly guts the returns the company is pitching. The cap table pays for steel.

• You pay for it too. Founders and early backers get diluted against assets that should never have touched the equity line, and the valuation required to make that dilution bearable sets a bar the company may never grow into. The down round is seeded years in advance.

• Then the worst part, and it lands on all of us. When the returns come in mediocre, because so much equity went to steel, they confirm the exact bias the category is fighting: hardtech is too capital-intensive, the returns are bad, the maths doesn’t work. Every bloated, mis-sequenced round that underperforms erodes the market’s trust in the whole asset class and makes the next good hardtech founder’s raise harder. The damage is collective.

The fix isn’t more conviction. It’s the sequencing above: equity to the point of repeatability, debt beyond it. Timing is as much the lever as access.

• Equity should buy the team, the technology and the commercial traction — the things only equity can buy. A facility funds the assets. Do that and the round shrinks to what equity is actually for, becomes fillable, the dilution turns sane, and the returns on the equity slice start to look like the software-grade returns this room already knows how to underwrite.

• Debt that arrives a year too late has already let the company over-raise equity. The work of becoming financeable has to begin before the capex ask does — which is exactly why the screening that follows is your job and not only the founder’s.

• The funds that get ahead of this do two things at once. They protect their own ownership, and they help rehabilitate a category that’s spent a decade paying for its own mis-sequenced rounds.

V. What you need to understand to tell the contenders from the pretenders

You know the venture path well. To pick well here, you need enough fluency in the rest of the stack to spot who’s bluffing.

5.1 The instruments. There’s no single thing called “debt.”

• Corporate debt lends against the company. Asset-backed finance lends against the asset and its cashflows.

• The menu is wide, and each instrument has its moment: leases, floorplan, project finance, instalment structures, as-a-service facilities, order-book and offtake financing, factoring, and blended structures.

• A useful frame: debt funds the inputs, credit funds the outputs.

• Much of it sits off the operating company’s balance sheet, inside an SPV built precisely so asset risk and corporate risk can be priced apart.

5.2 The lenders. Not interchangeable, and neither are their mandates.

• Banks, credit and hedge funds, family offices and pension funds each underwrite to a different cost of capital and a different risk tolerance.

• Venture debt is the one most often misread. It’s tied to the last equity round, sized at a quarter to a third of it, and doesn’t scale with the asset base. It’s a bridge, not an engine.

• Watch for the misdiagnosis: nearly every founder is convinced they need project finance, and most don’t. A team that knows which instrument it actually needs is already ahead of the pack.

5.3 What they care about, and why it isn’t what you care about.

• You can lose seventy percent of a portfolio and still win on the one position that returns a hundred times. A lender can’t. A lender needs every deal repaid.

• To you, risk is the thing you’re paid to take. To a lender, risk is the thing that has to be engineered down.

• A first-of-a-kind plant is catnip to equity and repellent to credit. The founder who understands why is the founder who’ll eventually raise both. We’ve written about this in Capital Intensity Isn’t Bad.

5.4 The two languages. A reliable tell when you’re sitting across from a team.

• To raise equity you sell upside, a share in a future that doesn’t exist yet. To raise debt you sell a contract — a defined risk for a defined return.

• The same sentence lands as optimism to a venture investor and as cashflow-and-collateral to a lender. Debt is allergic to spin. We mapped this translation in Capital Stack Parallax.

• The founders who can already speak both are the ones who’ll clear the bar when it matters.

Increasingly, the venture round itself waits on this. The Series A doesn’t get signed until a company can prove it’s capable of raising a scalable asset-backed facility at all. Debt-readiness has become an equity gating item. That’s the shift in one sentence.

VI. The hiring signal: a CFO and a capital markets operator are not the same person

The clearest early signal of all is who a company hires, and when. The serious finance leader is no longer a Series B afterthought. Increasingly the CFO is an early, even founding, hire, brought in to design the capital stack from the first contract rather than to clean it up later. No wonder. When the second customer is the capital markets, the person fluent in their language belongs in the room while the company is being built, not after it’s diluted its way through three rounds.

But look past the title. Most startup CFOs are excellent at what startups have always needed: budgets, board decks, the next equity round, the audit. Capital markets are a different discipline, and they’re the one that unlocks scale. Very few startup CFOs have ever structured a facility, sat across from a credit fund, or carry the lender network a structured raise actually runs on. That experience and that rolodex are the scarce asset. Find a hardtech company that has it — in the CFO, a founder, or a deliberate advisor — and you’re looking at a company that can be financed. When you don’t, assume the capability has to be built or bought, and price that gap into your view of how the next three years get funded.

The exercise itself is the value. The decisions compound from the earliest days: how exit clauses are written, whether a customer contract transfers cleanly into an SPV, whether the supply chain is legible enough to underwrite. Pre-seed choices echo for years.

And there’s a signalling effect in your favour. A company that matures to the point where lenders find it interesting has, in the process, become the kind of company everyone else finds interesting too.

VII. Your screening checklist: the seven things lenders underwrite are the seven things you should diligence

Whatever the asset class, lenders converge on the same short list. We offer it as a selection lens, because a company that can answer it is a company that will preserve your ownership — and most of the list is simply ordinary hygiene, the discipline a serious company would want regardless. It has to come if the company is going to succeed at all.

1. A credible equity position and continued access to equity. Do the owners have conviction, and is the next round reachable?

2. Genuine financial sophistication on the team. Can someone in the building speak to the second customer, the capital markets?

3. Sound credit and underwriting at the asset level. Do the unit economics survive scrutiny, not just a pitch?

4. Disciplined asset-level data hygiene and automated reporting. Can the company show, and monitor, what it’s asking a lender to fund?

5. Automated, reliable collections. Does cash arrive predictably enough to be financed?

6. Demonstrable volume and pipeline. Is there enough repeatable deployment to build a facility around?

7. Well-defined corporate and asset-level operations. Is the structure clean enough to isolate and price risk?

VIII. The pattern, proven

This isn’t theory. The proof points are stacking up, and they share a shape worth learning to recognise.

• Enpal tracked every panel it installed like a financial institution long before it was treated as one. That discipline unlocked Europe’s first public residential solar ABS with M&G in late 2024, around €240 million, then in late 2025 what the partners called the world’s first public securitisation to blend residential solar and heat-pump loans, around €300 million, oversubscribed several times over. Discipline first, capital markets second.

• Crusoe paired the two instruments deliberately from its Series D onward: equity for the vision, asset-backed facilities for the build. Its CEO puts the philosophy plainly — put each major category of capex under its own asset-backed facility, and reserve equity for technology, team and growth. The result is one of the fastest-scaled infrastructure balance sheets of the cycle, each facility unlocking the next.

• Elvy refused the default. Rather than burn equity to put hardware on roofs, it secured a €500 million debt facility from the platform Scayl and a banking partner, financing the rollout of solar, heat pumps and batteries almost entirely with debt. Its founder has said he never wanted to use equity to finance asset deployment, and that full debt backing for projects like this was something he hadn’t seen done before. Equity for the company, debt for the steel.

Where this leaves you

Much of what the market still repeats about hardtech is wrong. Too capital-intensive. Poor returns. Can’t raise debt early. Tangible are in the rooms, for the funds and the founders, watching that consensus get dismantled and hundreds of millions deployed to put it to rest.

The funds that learn to screen for debt-readiness, and to push their companies toward it, will compound a structural advantage. When a portfolio company finances its assets with the right capital instead of the most expensive capital, your ownership is preserved, your winners stay financeable, and your fund gets to participate in a supercycle equity alone was never built to fund.

We’re inviting you to learn to pick them — and to tell us where you think we’ve got this wrong.

Tangible exists to help hardtech companies raise from their second customer, the debt markets. They’re working with dozens of hardtech companies to help founders navigate them. Start with Hardtech’s Debt-Raising Map, or find out more at tangible.finance.

Viewpoints is brought to you by FOV Ventures, the leading European fund investing in the next era of computing.

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