Dear reader,
Happy Tuesday, and welcome to the RO Espresso.
This week’s theme pertains to capital structure.
Capital can be raised by selling partial ownership of the company (equity), issuing promises of repayment + interest (debt), or both.
The VC zeitgeist often glosses over the debt route. Let us rectify that. Founders mustn’t write off debt as a fundraising option and yes, that was a pun.
Today, we explore why and how three startups The Realistic Optimist covered (in Chile, UAE, and Kenya) raised debt.
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Owe > Own
Debt finances predictability. With debt, a founder can build a prediction model. How much is owed? When is it due? What are the regular interest payments? Debt is efficient and reliable growth capital when a company knows exactly what it’s selling and the resulting cash flow it can expect.
Debt is particularly relevant if capital is central to a startup’s business model.
If a startup’s core business is to lend capital (to consumers or businesses), scaling by continuously raising equity means founders get increasingly diluted the more their revenue grows. Not ideal.
In such cases, raising debt is preferred. Below are a few examples.
Xepelin (Chile & Mexico)
SMEs in LATAM struggle to access credit because they maintain analog accounting systems. This prevents banks from easily accessing the data they need to safely underwrite loans.
Chilean startup Xepelin approached the problem differently.
It launched a free CFO SaaS tool, enabling SMEs to digitize their financial operations. This gave Xepelin granular data to then underwrite various lending products (invoice factoring, purchase financing…) to the SMEs using the tool.
To lend capital, Xepelin needed deep pockets itself. Since its launch in 2019, Xepelin has raised over $300 million, mixing equity and debt.
Sebastian Kreis, co-founder of Xepelin, frames the debt dynamic clearly:
“Debt providers are more prosaic than equity investors. They’re not buying a dream nor a vision. They’re buying a coherent, predictable, scalable source of revenue. You need to show debt providers results early. They can’t anxiously wait 12 months to see if their decision was the right one.
[...]
Our debt providers include international banks, hedge funds, local asset managers… We generally start with smaller players before moving onto institutionals once we have some solid historical data.”
To scale its lending volume, Xepelin structures the loans it extends to SMEs as SPVs.
This is a tad technical, so we’ll let Sebastian explain:
“We could theoretically hold the loans we extend as an asset on our balance sheet. That would weigh us down, as we’d be limited by the money we have on hand to extend more loans. It also means all of the risk is on us.
What we do instead is wrap up those loans into SPVs. Investors can invest in those SPVs, and become entitled to a share of loan repayments. We thus access instant liquidity from the SPVs we emit, and shift part of the risk to the SPV’s investors rather than us directly.
That structure enables us to scale the loan volume we extend much faster. We have around 15 of these SPVs today. Those SPVs are also a great way to create initial relationships with potential debt issuers.”
Excerpt from Xepelin: raising $300M to finance LATAM's SMEs (November 2025).
RO Insights: Plugging institutional capital into SMEs.
Xepelin is a bridge between large, institutional capital and LATAM's credit-deprived SMEs.
Their products is designed as such.
Xepelin’s invoice factoring product for example has an average payback period of roughly 45 days. That short duration reduces risk for debt providers. Capital is deployed, repaid, and recycled quickly.
These rapid feedback loops build institutional confidence and make it easier for Xepelin to scale debt facilities.
Keyper (UAE)
Dubai’s rental market operates on an unusual system. Tenants are often required to pay a full year of rent upfront. For landlords, this minimizes payment risk and simplifies cash flow planning. For tenants, it creates an expensive, potentially prohibitive, upfront cost.
To address this, Keyper, a Dubai-based proptech startup, offers a rent-now-pay-later (RNPL) product.
Keyper advances the annual rent to landlords upfront, eliminating landlord default risk, and collects monthly payments from tenants.
Keyper raised $30 million through a Sukuk to finance that product. A Sukuk is a Sharia-compliant bond.
As Walid Shihabi, co-founder of Keyper, explains,
“We started off conversations in the venture debt space but ended up settling for the Sukuk financing, where we had more agency over the instrument’s structuring.”
It wasn’t just about flexibility. It was also a lack of credit options that pushed Keyper to take this route:
“We make money on the difference between the cut we take on RNPL versus what we owe the bank on our Sukuk financing. This instrument made more sense for us, as accessing bank credit lines as an early-stage startup here is difficult.”
Excerpt from Keyper: proptech in the UAE (November 2024).
RO Insights: Looking beyond venture debt.
Rather than chasing venture debt, Keyper structured an instrument aligned with its cash flow profile and adhering to religious norms.
The term "bond" may sound institutional, the remit of governments and large corporations.
A deeper exploration shows that debt instruments are numerous in their diversity and malleability. Founders should seek the debt instrument most adapted to them, rather than instinctively picking what's available within "startup world".
Jia (Kenya & Philippines)
Similar to SMEs in LATAM, SMEs in Africa and Asia also have low levels of digitization. This prevents banks from standardizing data and underwriting credit.
Jia addresses this gap by "financing" the invoices of SMEs in the Philippines and Kenya.
When an SME sells goods to a supermarket or distributor, some must wait 45–90 days for payment. Jia "purchases" the invoice the SME issued at a discount, unlocking instant cash for the SME. When the end-client pays, Jia collects the full invoice value.
The difference between the discount it bought the invoice at and the full payment amount is Jia's margin.
This solves SMEs' liquidity problem, while anchoring the loan to a real commercial transaction rather than an abstract credit score.
To fuel this model, Jia needs significant capital reserves. Jia has raised from traditional debt issuers, but is also exploring the crypto route.
Zach Marks, co-founder of Jia, explains:
"Jia tokenizes our borrowers’ invoices. We mint an NFT representing that invoice as a digital asset on-chain. Crypto lenders can then buy that invoice in stablecoins (cryptocurrencies pegged to real-world currencies).
Jia converts that stablecoin to local currency and sends the money to the SME. Once the invoice is paid by the end-client, Jia converts the local currency to stablecoin and pays back the crypto lender, with their cut added on.
There is still a lot of off-chain action and Jia is heavily involved in every transaction.
Our North Star would be for an SME in Kenya to tokenize an invoice they’re owed, sell it to a crypto lender, get the money instantly as USDC or USDT (stablecoins pegged to the US Dollar) and do what they wish with it. By keeping their money in USD stablecoins, the SME would be shielded from their local currency’s devaluation. The crypto lender would then get the invoice repaid by the supplier directly via crypto as well.
We’re starting manually and building tech to gradually automate ourselves away, sit on top of the infrastructure, oversee operations and take a cut from the money flowing through the system."
Excerpt from Jia: blockchain-based lending for SMEs (March 2025).
RO Insights: Broadening the pools of capital.
Xepelin connected institutional capital with credit-deprived SMEs.
Jia seeks to connect another yield-seeking pool of capital, crypto reserves, with credit-deprived SMEs in Africa. The technical and operational lift is, admittedly, much heavier.
But it opens the door to an alternative path. If a startup restricts itself to raising debt from local, traditional lenders, maybe it's missing out on foreign/crypto pools of capital willing to lend more, at lower rates. It's worth a look.
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Disclaimer: the articles quoted here were posted in 2025 and 2024.
While what the interviewee expressed at that time was their current thinking/numbers, it might have changed. We believe their thoughts are valuable nonetheless.