WRNT - Innovation Deserves Better™

A Practical Briefing for Founders and Their Partners

Startups rely on equity and debt for growth, but there’s a third tool that can unlock strategic partnerships, preserve cash, and extend runway: warrants. Having built multiple startups and worked with countless financial partners, we’ve seen firsthand how warrant-based strategies create extraordinary win-win scenarios when done right.

Let's explore why this matters for everyone in the startup ecosystem, especially for founders and the companies who serve them.

What Exactly Is a Warrant?

Simply put, a warrant gives the holder the right to purchase shares at a predetermined price in the future. Unlike options (which typically go to employees), warrants are more flexible and issued to external partners, often as part of commercial agreements.

Think of warrants as a promise to let someone share in your future success at today's price. The genius is in the timing: they create value today but typically only convert to equity upon a liquidity event in the future, at the moment of least monetary impact.

Moving Warrants from Misunderstood Afterthought to Strategic Driver

Most people have heard of warrants, but they're typically viewed as an afterthought–that little thing tacked onto a venture debt term sheet that nobody really thinks about strategically. Sound familiar?

It reminds us of where venture debt was a decade ago. Remember when people questioned why a well-funded startup would ever take on debt? Now it's widely accepted that prudent use of debt alongside equity creates better outcomes for everyone. Founders get more runway without unnecessary dilution, and investors see improved returns.

Warrants are at that same inflection point today.

Too often, founders and enterprise suppliers approach warrants reactively or defensively, without any thoughtful strategy. They're treated as a one-off transactional negotiation point rather than a systematic tool for value creation. But when incorporated into a consistent playbook for the innovation economy, they unlock tremendous win-win value across multiple scenarios:

Converting cash burn on suppliers into extended runway
Enabling startups to land strategic marquee clients
Building relationships with much larger and more powerful suppliers
Creating aligned incentives across the entire growth journey

The companies that develop coherent warrant strategies - rather than ad-hoc additions - are the ones that exceed expectations in the innovation economy.

Here’s the uncomfortable truth: Most deals with investor-dependent startups still rely on cash-only terms, creating a massive disconnect that hurts everyone involved.

The sobering reality is that startups burn through over $50 billion annually on suppliers, customers, and banks. That's precious capital that could be funding growth, closing deals, extending runway, or weathering the inevitable surprises.

This cash-only approach creates a fundamental disconnect. As founders, we're building for long-term value creation. Yet critical partners are often stuck in transactional relationships with cash only pricing and no stake in our success.

Real-World Success Stories

Using warrants to create strategic alignment and offset cash isn't theoretical. Look at some notable warrant success stories:

Square (now Block) leveraged warrants with Marqeta to build their Cash App, creating strategic alignment that helped both companies grow exponentially. This partnership, strengthened through warrant agreements, allowed Square to scale rapidly while maintaining critical cash reserves during their growth phase.

Instacart took a similar approach by issuing warrants to Albertsons and other grocery partners to secure better terms and deeper integration. This brilliant move opened doors and transformed what could have been potential competitors into aligned allies with skin in the game. The grocery chains provided better terms and deeper integration opportunities because they saw Instacart's success as directly tied to their own financial outcomes.

Adyen, the global payments giant, used warrant agreements in its landmark deal with eBay while preserving capital during their critical early growth phases. This approach allowed them to secure a major client that might have otherwise been out of reach given their cash constraints at that stage. Meanwhile, Toast incorporated warrant-based deals to accelerate growth while minimizing cash burn, helping them overcome the traditional growth barriers in the restaurant technology space. Perhaps the most compelling evidence comes from Silicon Valley Bank, whose scaled up warrant portfolio generated gains that offset credit losses consistently over 21 years. This wasn't just good business: it created a virtuous cycle that helped thousands of founders succeed while providing the bank with returns that far exceeded traditional lending models.

Why Warrants Work: The Alignment Effect

Traditional vendor relationships are misaligned: suppliers want cash upfront, but startups need to preserve capital. When financial pressures mount (as they always do), these relationships strain under competing priorities.

Warrants flip this dynamic. By giving suppliers a stake in your success, they go from transactional vendors to long-term partners, offering flexibility, introductions, and support that extend far beyond a typical contract.

Most importantly, warrants preserve cash exactly when it matters most – during the critical growth phases when every dollar of runway matters. This alone can mean the difference between success and failure for early-stage companies navigating uncertain markets.

The Founder's Perspective: Why This Makes Sense

Let's be real: dilution is something we all worry about. But smart founders recognize that warrant dilution is fundamentally different:

Timing: Unlike raising equity today, warrant dilution materializes upon exit, when the company has grown substantially
Scale: Typical warrant agreements represent minimal dilution, often less than 0.5%
Control: No board seats, voting rights, or governance implications
Value: Present cash preservation often far outweighs the future dilution cost

A typical set-up might convert 15-30% of a supplier contract from cash to warrants. On a $500K contract, that's up to $150K in runway extension.

Getting Started: Key Considerations

If you're thinking about incorporating warrants into your strategy, here are some practical considerations:

Structure Matters: Design warrant agreements that align with your objectives, cap table, and future fundraising plans
Valuation Framework: Use a consistent tailored approach to pricing warrants
Documentation: Ensure proper legal and accounting treatment from day one and establish sustainable management systems and processes
Disclosure: Keep your board and investors informed about warrant issuance
Portfolio Approach: Consider warrants across multiple supplier relationships for maximum impact

The Future of Startup Financing

The startup world is finally moving beyond the false binary of equity versus debt. This third path—strategic warrant-based financing—offers founders a powerful tool to navigate today's challenging fundraising environment while preserving both cash and control. And for the banks, financial institutions, and enterprise suppliers serving these startups, well-structured warrant programs deliver superior risk-adjusted returns and transform transactional relationships into genuine partnerships with tomorrow's industry leaders. In a market where capital efficiency matters more than ever, this third option isn't just smart—it's increasingly essential.

Let’s Explore this Together

If you’re thinking about how warrants could help extend your runway, deepen supplier partnerships, or preserve equity — we’re happy to walk you through examples or help you structure a starting point.

You can reach us directly at http://wrnt.co or book time with us at calendly.com/wrnt/30min.

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Wrnt is the first platform purpose-built to simplify, streamline, and scale warrant-based transactions and administration. Founded by veterans of Silicon Valley Bank and HSBC, Wrnt brings deep expertise including direct experience managing one of the most active warrant portfolios in the innovation economy.

Warrants: The Secret Weapon Smart Founders Use to Extend Runway and Build Strategic Partnerships