“Oh, you want non-dilutive? We have that. We’re on your side. You guys are solid.”
That’s what they all say. Almost word for word. Like they’re reading from a script, because they are.
When you become a micro-cap public company CEO, one of the first things you discover is that there is no shortage of people willing to give you capital. Debt providers, convertible note structures, various financial instruments pitched as “flexible,” “founder-friendly,” and “aligned with your interests.”
The calls start coming in and, at first, you think, great, options. Then you start to notice the pattern.
To be clear upfront: I’m not talking about any specific deal Onfolio has done. This is about the general landscape that every micro-cap CEO navigates when raising capital.
They Don’t Need to Know What You Do
Most of the capital providers reaching out to micro-caps don’t know what your company does. They don’t need to. The structures they’re offering are designed to protect them regardless of what happens to you.
Some of them can short against your stock while lending to you. They’ll make money whether your company succeeds or fails. The product is structured so that the outcome for them is positive in almost any scenario.
This isn’t necessarily malicious. It’s just how the micro-cap capital market works. These are products being sold by salespeople. The product is capital. The salesperson is the banker. And like any good salesperson, their job is to close the deal, not to evaluate whether it’s right for you.
The tone is always the same: confident, reassuring, slightly condescending. “We’re on your side.” “We understand what you’re going through.” “We work with companies just like yours.” But when you dig into the term sheets, the alignment they described starts looking a lot more one-sided.
The Information Asymmetry Problem
Here’s what makes this genuinely difficult: as a first-time public company CEO, you often don’t know what you don’t know.
You don’t know which structures are standard at your size and which are toxic. You don’t know what “market terms” look like for a company with your market cap. You may not have a deep bench of advisors who’ve navigated micro-cap capital markets specifically, because the people who have that experience are a small and often hard-to-reach group.
Investment bankers at this level are salespeople first. They may have real expertise, but their incentive is to close the transaction, not to optimize it for you. And when multiple bankers are telling you the same thing, it’s hard to know if that’s because the terms are genuinely standard or because they’re all selling the same product.
The Two Bad Outcomes
When you’re in this position, surrounded by capital offers you can’t fully evaluate, one of two things tends to happen.
You take something you shouldn’t. Because you need the capital, the person across the table seems credible, and you don’t have enough reference points to distinguish standard from predatory. You find out later that the terms were worse than you thought, or that the structure had implications you didn’t fully understand.
Or you do nothing. Because everything feels off, but you can’t articulate exactly why, so you default to inaction. You tell yourself you’re being cautious and disciplined. And sometimes that’s true. But sometimes it’s just paralysis dressed up as strategy.
Both outcomes hurt. The first one hurts immediately; you’re locked into bad terms with real consequences. The second one hurts slowly; you lose time, miss windows, and fall behind where you could have been.
What Actually Helped
What I’ve learned is that the solution isn’t finding the one perfect capital partner. It’s building the infrastructure to evaluate them before you’re desperate.
The single most valuable thing I did was connect with other public company CEOs, particularly ones at our size or slightly ahead. They’d seen the same pitches and could tell me what was standard, what was aggressive, and what was toxic. That network turned out to be invaluable, and it would have been almost impossible to build if I’d waited until I was actively in need of capital.
Talking to multiple advisors made a huge difference too. Instead of relying on a single banker’s perspective, I started getting multiple term sheets and comparing them, then asking people outside the transaction to review them. The best gut-checks came from people who had no financial stake in my decision.
I also made a point of learning the language when the stakes were low. Convertible notes, warrant coverage, death spirals, reset provisions, all the structures that get pitched to micro-caps. Learning this vocabulary while someone is pressuring you to sign is a losing position.
All of this took time to build, and I’m glad I started before I needed it. When the capital window opens, and it always does eventually, you need to move with confidence, not scramble to figure out who to trust.
A Note to Shareholders
If you’re invested in a micro-cap, here’s something worth understanding: your CEO isn’t choosing between Goldman Sachs and Morgan Stanley. The menu of options available to small public companies is limited, and most of what’s on offer is structured to favor the capital provider.
Again, I’m speaking generally about the micro-cap capital markets landscape here, not commenting on any specific financing Onfolio has done. The “best available” option at this level might still look ugly compared to what you’d see at a larger company. That doesn’t mean the CEO made a bad choice; it often means the options were constrained.
If you have relevant experience in capital markets, corporate finance, or public company operations, share it. That kind of support from shareholders can be genuinely valuable. Not the “you should have done X” kind of support after the fact, but the “here’s someone you should talk to” kind before a decision gets made.
If this was useful to you, it would probably be useful to someone you know. Feel free to share it or forward it to a friend. One of the hardest things about being a small public company is simply being discovered, and word of mouth goes further than anything else.
— Dom
Disclaimer: This reflects my personal experience navigating capital markets as a micro-cap CEO. It is not financial advice and should not be taken as commentary on any specific capital provider or financial product. For information about Onfolio’s capital structure, refer to our SEC filings.