Capital efficiency: what we learned from our panel with Mighty Partners

At 'How to Stay Capital Efficient as You Grow', LUNA's panel event with Mighty Partners on 12 August, three finance leaders unpacked what it really takes for a growing business to stay capital efficient.

I had the pleasure of moderating, with the operator, the equity investor and the lender all at one table: Rob Paterson, CFO at Employment Hero; James Johnstone, Partner at Bailador; and Kal Jamshidi, Managing Director at Mighty Partners.

The debt-versus-equity question was inevitably part of the conversation, but the real discussion sat underneath it:

‍what is the business actually trying to fund, what will that capital really cost, and how prepared is the business before it goes to market?

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‍Choosing the right instrument

‍Rob opened with a candid walk-through of how Employment Hero financed its acquisition of KeyPay. It was, in his words, a whirlwind, valued and negotiated on a compressed timeline. The team tested the market for external equity, and existing insiders offered to fund the deal too, but on the terms available that route looked too dilutive. Instead, they structured it as roughly two-thirds debt and one-third equity to manage the cost of capital. That original facility has since been refinanced, but Rob said the structure worked out well for their cap table over time.

What I liked about the example was that there was no blanket answer on debt versus equity. Johnstone came at the question from first principles: what problem is the business actually solving, and what is the right instrument to deliver that outcome? His rule of thumb was that the more volatility or uncertainty there is in the likely outcome, the more caution warranted on debt. Tighter, more predictable situations are where debt sits comfortably.

Kal put the lender’s perspective simply: debt underwrites predictability. It is priced against what is already provable, not a bet on upside.

A good fit might be a company using debt against a strong, predictable domestic business to fund geographic expansion, rather than betting the whole raise on a new market working. It is a useful distinction. The instrument is only as good as its fit with what you are asking it to fund.

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‍The costs beneath the headline

‍The conversation on cost was probably the part I found most interesting. It is easy to focus on the obvious number: valuation and dilution on the equity side, or the interest rate on debt. The discussion was a good reminder that neither tells you the full story.

Johnstone urged founders not to anchor solely on valuation and dilution. Control terms and governance matter too, particularly when thinking about what the business needs to look like two or three years after the deal, not just at signing.

Debt has its own less obvious costs. Kal’s advice was to compare the true cost of a facility rather than the headline rate, including fees and early-repayment charges that can become material if a facility is refinanced. Rob had seen that first-hand, recalling venture debt terms that were “extremely tight”, an experience that shaped how he now weighs control terms against pure economics.

For me, that is where the comparison becomes more useful: not simply “what does this capital cost today?”, but what comes with it and what does it mean for the business over time?

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‍Stress-testing the plan

‍The same thinking came through in the discussion on growth plans. Rob advocated starting with the whole business rather than assessing a new initiative in isolation, using a portfolio approach and milestones tied to explicit go/no-go points.

Kal wants genuine scenario planning down to real numbers; Johnstone is wary of hockey-stick-only forecasts and looks for a credible path to profitability.

There was nothing particularly theoretical about the advice. If the plan changes, you need to know what that means for the rest of the business and the capital supporting it.

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‍Staying raise-ready

‍The closing advice was equally practical. Kal’s message was to always be raise-ready, with clean historicals and data-room items kept current as a matter of course.

Johnstone described fundraising as an iceberg: most of the work sits beneath the visible pitch, so map likely funders early and know your numbers cold.

Rob’s point was blunt: it takes more time and pulls more focus than founders expect, so budget for it and surround yourself with good advisers.

If you’re thinking about raising, the work starts well before you’re in market. Know what you need the capital for, understand the terms properly, and make sure the business is ready before you need the money.

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My thanks to Rob, James and Kal for their candour, and to everyone who joined us so early — that’s exactly the kind of practical conversation these mornings are for.