Playbook 10 — Debt You Control vs Debt That Controls You

Every startup is built on debt. The question is whether you own it, or it owns you.

Purpose

Every startup is built on debt — technical shortcuts, product hacks, weak hires, investor capital.

Debt isn’t the problem. Losing control of it is.

Debt is leverage: today you borrow speed, tomorrow you repay stability.

The difference between growth and collapse is knowing which debts you control, and which debts control you.

Core Principles

Debt as Leverage

  • Debt itself isn’t bad. It’s a scaling tool.
  • Rule: only carry the debts you can service without losing control.

Domains of Debt

  • Tech → hacks, missing tests, infra shortcuts.
  • Product → cut scope, delay instrumentation, ship without polish.
  • Org → weak hires, misaligned incentives, lack of succession.
  • Money → overhiring ahead of revenue, investor burn, vendor financing.

All obey the same law: borrow speed today, repay stability tomorrow.

Prototype vs. Production

  • Hacks tolerated in prototypes, never in critical flows.
  • Rule: experiments stay in sandboxes; core systems must be resilient.

Bus Factor Discipline

  • No single person should hold a system hostage.
  • Succession through documentation, cross-training, or hiring.

Debt Horizon Principle

  • Immediate (blocking) → kills velocity now → act fast.
  • Medium (compounding fragility) → plan 3–5 steps ahead, act before explosion.
  • Noise → ignore.

Risk Classifications

At VP level, only two risks matter:

  1. Blocking Risks (Revenue-Linked) — Fragilities that directly prevent main initiatives from landing.

  2. Bomb Risks (Fragility-Linked) — Fragilities that may never explode, but if they do → existential damage.

Everything else is noise. Don’t waste cycles.

Strategic Patterns

Tech — Single Point of Failure

Critical system knowledge concentrated in one person.

Risk: Blocking. Call: Document, cross-train, or hire backup expertise.

Product — Prototype in Production

Core workflow running on experimental tooling.

Risk: Blocking. Call: Rebuild in a stable environment before scaling.

Org — Incentive Misalignment

One team rewarded for speed, another for stability.

Risk: Bomb. Call: Align compensation and metrics to shared outcomes.

Money — Overhiring Ahead of PMF

Headcount scaled before product-market fit, financed through investor capital.

Risk: Bomb. Call: Align hiring to runway and compounding growth, not vanity.

Executive-Level Discipline

In a healthy system:

  • Leads own risk registers for their domains.
  • Quarterly reviews → reclassify debts, decide what to tolerate vs. what to kill.
  • Executive role → own the debt portfolio. Know what you’re borrowing, why, and exactly when you’ll pay it back.

Why It Matters

  • Startups rarely die from “no features.” They die from fragility hidden in the system.
  • Debt isn’t about elimination. It’s about choosing the debts you control, and killing the ones that would control you.

The best leaders don’t avoid debt — they choose it deliberately.

Controlled debt scales companies. Uncontrolled debt kills them.