• One of my portfolio companies often talks about their "Technical Debt" – the notion that they paying the price for historically putting off building a robust platform in order to meet short-term customer needs.
• I love the movie, Pay it Forward. It beautifully depicts the benefit of being nice to someone for no personal gain and then encouraging them to "pay it forward" to another party. If that kindness becomes too one-way between two parties, "Relationship Debt" can form. I often find myself reflecting on how luck I have been in my life to have had such great mentors and hope that I provide enough reciprocal relationship value to them so as to not be too deeply in debt to them.
• My wife and I talk to our kids a lot about "Behavior Debt" – the notion that you have to deposit some kindness and good behavior "in the bank" if you want to get something in return from someone down the road (you can imagine how annoying a parent I must be…).
• If you miss a number over and over again or a deadline, you build up "Commitment Debt." One of my portfolio companies gives the same caveat when reporting on the status of a promising partnership developing with a Fortune 50 company: "Remember, though, this is a company that has never hit a single deadline it's given us." At the start of the 2012 planning process, one of my fellow board members commented ruefully in the private session: "The plan sounds good. Remember, though, this is a company that has never hit a single plan number it's given us." (note to self: when someone starts a sentence with "Remember, though...", it's not likely to be a positive comment).
3. Paying Off Debts Is Painful and Demands Sacrifice. It's never easy to step back and pay off your debts, but it is often the right course. Unfortunately, when you're an entrepreneur, you don't always find yourself in a position of strength when it comes to paying off debts. Going into "technical debt" is often required to survive and drive cash flow. Commitment debt can be out of your hands if you're never able to secure the necessary resources required to deliver on your commitments. You get the picture.
I suggest you make these debt trade-off decisions consciously, not unconsciously, and keep an eye on those debts as they accumulate. The last thing you want is to find that debt roughly knocking on your door some night when you least expect it, or are in a position to handle it. Isn't that right, Washington DC?
Jeff Bussgang is general partner at venture capital firm Flybridge Capital Partners. You can follow him on Twitter @bussgang
