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The Personal Guarantee That Stole 2.5 Years of Sleep

The Story

Gettacar needed inventory financing on top of the venture capital. A car retailer can’t run on equity alone, “automotive is again a ~5% net margin business” and “we became cashflow negative pretty quickly as we started building a team” (Source 1).

Banks weren’t comfortable with a young VC-backed online retailer. “The banks that were willing to provide debt to us did not feel as comfortable with our business. And they said, ‘Hey, we need some guarantee.‘” (Source 1).

Yossi personally guaranteed the line. “I had to put up collateral, like my personal assets from personal real estate that I owned, which I’d built up over a couple of years. I built up some stakes, bought some properties with my friends. But it was scary that I knew that, look, I’m going all in.” (Source 1).

His own internal calculus at the time: “Would I do that today with three kids? Absolutely not. I wouldn’t need to do that today anyways. At the time I was single and I said, ‘Look, I’ve already raised a VC. There’s no going back. I’m all in. What’s the worst that happens? I’ll have to declare bankruptcy or something. I don’t know, but I’m all in.‘” (Source 1).

The deal: “We ended up taking this term sheet from Ally for debt. I think they gave us a $5 million line, but it did come with a PG, which took me about two and a half years to get removed.” (Source 1).

The retrospective lesson, in his words: “Be very thoughtful and cautious about the initial deal you get into. Because once you get into that deal, it’s very, very tough to change terms down the line without some immense amount of leverage, which we didn’t have… that term stuck with me for years and I lost lots of sleep because of it.” (Source 1).

Lesson for Creators

Initial deal terms are sticky. The point at which you have the least leverage (when you need the money) is also the point at which you sign terms that will follow you for years. Once the ink dries, even success doesn’t easily renegotiate them. Yossi’s PG took 2.5 years to remove. The lesson generalizes beyond debt, applying to publishing contracts, sponsorship exclusivities, agency retainers, and equity vesting: the time to push hard on terms is before you sign, not after.

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