Deal Terms
Tranche Financing
Investment capital released in multiple installments tied to the company hitting specific milestones.
Tranche financing structures an investment into multiple disbursements contingent on the company achieving predetermined milestones. This gives investors downside protection — if the company misses milestones, remaining tranches aren't released. For companies, it can mean lower dilution on early tranches if subsequent ones come at higher valuations.
In Practice
A $10M Series A is structured in two tranches: $6M at close, and $4M released when the company hits $2M ARR within 12 months.
Why It Matters
Tranche financing reduces investor risk but can create pressure on founders and signal lack of full conviction. It's more common in capital-intensive sectors like biotech and hardware.
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