Jo Tango

New report by leading semiconductor analyst Dylan Patel shows that DeepSeek spent over $1 billion on its compute cluster. The widely reported $6M number is highly misleading, as it excludes capex and R&D, and at best describes the cost of the final training run only.

How could a company shut down abruptly with no warning? The Answer: Debt Covenants on Venture Debt While this isn't specifically about Bench (I have no inside knowledge), their "$60M" Series C illustrates an important point - Pitchbook shows it was actually $37M equity and $23M debt. Further evidence that they used debt: Bench lists SVB as an investor on their website, likely venture debt. A plea to journalists: Always ask companies to break out equity vs debt in fundraising announcements. Only include equity in headlines! You are doing us all a disservice by including debt. Venture debt is most often used alongside an equity round. On paper, it seems counterintuitive for the lender - you get the risk of an early-stage company with capped upside of debt. Lenders get interest payments, warrants, and equity kickers, and only back companies where they're confident VCs will continue supporting them. Most importantly, they protect themselves with debt covenants. These covenants are mandatory conditions during the loan term, including financial requirements like: -Maintaining minimum cash balances -Meeting revenue/growth targets -Staying under maximum burn rates -Maintaining debt service coverage ratios And non-financial conditions such as: -Board composition -Major investor participation in future rounds Breach these covenants, and the lender can demand immediate full repayment, freeze bank accounts, and seize collateral - effectively forcing an instant shutdown. While rare (many companies don't fully utilize their venture debt, and lenders often show flexibility if communication remains open), it does happen. When lenders lose confidence in getting repaid, they'll call the capital and seize assets. Can venture debt be useful for scaling? Yes. But it's often misused to extend runway or inflate perceived fundraising totals - both dangerous moves. When business turns south, those seemingly helpful strings become deadly chains. As Warren Buffett noted (2018 letter): "We use debt sparingly. Many managers, it should be noted, will disagree with this policy, arguing that significant debt juices the returns for equity owners. And these more venturesome CEOs will be right most of the time. At rare and unpredictable intervals, however, credit vanishes and debt becomes financially fatal. A Russian roulette equation – usually win, occasionally die – may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside."