Can a Venture-Backed Company Sign a Bankable Infrastructure Contract?

How founders, investors, contractors, and customers can bridge the gap between growth-stage flexibility and project-grade certainty.

By Matthew Teismann

A venture-backed company (a “VBC”) may have a promising technology, committed customers, and a successful financing round, and still face a difficult question when it is ready to build or deploy real-world infrastructure: can it provide the contractual certainty that an engineering, procurement and construction (EPC) contractor, equipment supplier, landlord, utility, customer, or financing party expects for a major project?

The answer is often yes, but not by pretending that a growth company has the deep balance sheet, operating history, or established credit profile of a traditional infrastructure sponsor. The better approach is to build a coordinated package of financing, contract terms, credit support, surety, insurance, and continuity protections that gives each party a credible path through foreseeable execution problems.

This question is becoming more pressing as technology businesses move into capital-intensive sectors. Whether the project involves data-center capacity, AI infrastructure, distributed energy, advanced manufacturing, specialized equipment, logistics, or other physical assets, a VBC’s transaction is likely to combine the pace of a high-growth company with the delivery and performance risks of a complex infrastructure project.

What Is a “Bankable Contract”?

“Bankable contract” is often used narrowly to describe a contract that satisfies traditional project-finance lenders. The underlying concept is broader.

A bankable infrastructure contract is one that gives the relevant stakeholders reasonable confidence that the project can be funded, built, completed, and operated despite foreseeable risks. It sets out clear obligations, meaningful remedies, workable risk allocation, and sufficient credit support for the party bearing key delivery obligations.

For a venture-backed company, the key project stakeholders are likely to include an EPC, engineering, procurement, construction, installation and commissioning (EPCIC), or design-build contractor; an equipment manufacturer or critical supplier; a project owner, developer, landlord, or utility; a customer whose operations depend on timely delivery; equity investors, lenders, or other capital providers; and a strategic partner considering a joint venture or acquisition.

Each is asking a different version of the same question: if the VBC has difficulty meeting its funding, performance, or timing obligations, what happens next, and what does that mean for the project and for my financial position?

Two Seats at the Table

A VBC can come to an infrastructure contract from either side of the table. The bankability problem looks different from each seat.

In the first, the VBC is the buyer or owner. Here, the VBC might be a data-center developer commissioning a facility, an AI company contracting for dedicated power supply or capacity, or a manufacturer building its first production plant. In this role the VBC will typically hire an EPC contractor, order long-lead equipment, and sign leases or interconnection agreements. Here the counterparty’s central concern is payment: can the VBC fund the contract price (and pay its contractors and suppliers) through completion, and what will the contractor be able to recover if it cannot?

In the second, the VBC is the supplier, contractor, or technology provider. In this position the VBC may be a company delivering proprietary equipment, an integrated energy system or a design-build scope to an established owner. In other words, the VBC is the party making the performance promise. Here the counterparty’s central concern is completion: does the VBC have the resources and backing to deliver a working asset on time, and who finishes the job if it does not?

Many VBCs can find themselves occupying both seats at once, buying components and services from contractors upstream while promising performance to a customer downstream. A credit or remedy gap on one side can easily migrate to the other. The tools discussed below apply in both postures, but their emphasis shifts, and an effective negotiating position usually begins with clarity about the seat the VBC occupies in a particular contract. Throughout this article, “counterparty” means the party on the other side of the VBC’s contract, whether contractor, supplier, owner, customer, or capital provider.

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The Bankability Gap

The typical VBC is built for flexibility and speed. It may be funded through successive equity rounds, rely on a small number of key investors or customers, and be designed to change quickly as its product, market, or capital plan develops.

An infrastructure counterparty is dealing with a different set of issues. A contractor working for a VBC must mobilize personnel, order long-lead equipment, commit subcontractors, reserve manufacturing capacity, and accept a substantial period of payment exposure. An owner buying from a VBC commits capital, land, permits, and its own customer obligations on the assumption that the VBC’s scope will be delivered. Either way, the counterparty wants confidence that the VBC can fund and perform its obligations throughout the performance period. It also wants assurance that a meaningful remedy will be available if the project is delayed, suspended, or abandoned because of the VBC’s breach or default.

This is not a criticism of venture capital. Venture financing and project-grade delivery structures simply address different risks. Venture capital is generally deployed to support company growth and enterprise value. In contrast, project finance is typically structured around an asset or project company, its contracts and its projected cash flows over a long period.

This is undeniably a gap in the incentives of the parties, but it can be managed. Simply put, it should be acknowledged early, before a term sheet, purchase order, EPC contract, or customer commitment creates obligations that the VBC cannot comfortably support.

Start With Capital Certainty

The first question is not whether the VBC has raised capital. It is whether the VBC has a credible plan to fund the specific contract. The issue is most acute when the VBC is the buyer or owner. Nevertheless, a VBC acting as a project supplier faces the same question in funding its own procurement and workforce before it is paid.

A counterparty may be willing to work with a VBC if the agreement matches the company’s real capital plan. Solutions can include:

  • Advance payments, early-works funding, or funded reserves for long-lead equipment
  • Milestone payments tied to objective delivery, installation, or acceptance events
  • Escrow or controlled-account arrangements for designated project costs
  • Investor commitment letters or clearly defined financing conditions
  • Limits on work that may proceed before the next funding milestone
  • Change-order procedures that prevent uncontrolled cost growth

The objective is to ensure that payment obligations, construction milestones, customer commitments, and expected financing events do not work at cross-purposes during project execution.

A venture-backed company that is relying on a future financing round to make a critical payment or meet a critical performance milestone should identify that dependency clearly and negotiate a payment and financing structure that addresses it. Venture rounds carry their own conditions, investor consents, protective provisions, and company milestones, so the contract should also address what happens if a round closes late, closes smaller, or does not close at all. Treating future financing as an unspoken assumption rarely produces a bankable result.

Match Credit Support to Reality

Traditional infrastructure contracts often rely on creditworthy parent guarantees, letters of credit, affiliate guarantees, performance security, or other forms of financial backing. A VBC may not have a creditworthy parent, and investors are rarely willing to give an uncapped guarantee. It may also lack the liquidity or bank capacity to post a letter of credit without impairing its operations.

That does not end the prospective project. It changes the credit conversation. Alternatives to more conventional credit support include:

  • A sponsor, investor, or affiliate guarantee limited in amount, duration, or scope
  • Performance and payment bonds issued by a qualified surety
  • Where the VBC is the supplier, an advance payment to the VBC secured by an advance payment bond, which funds procurement without leaving the owner unsecured
  • Retention or milestone holdbacks
  • Security over specific equipment, accounts, or other project assets
  • A stepped package of support that reduces as objective project milestones are achieved

The key is to distinguish between comfort and recoverability. A counterparty may take comfort in knowing that prominent investors support a company, but that comfort does not create an enforceable payment or completion remedy. Conversely, an appropriately tailored instrument can give the counterparty meaningful protection without forcing the VBC to accept an open-ended liability that puts the company’s financial health at risk.

Two venture-specific complications deserve attention early. First, a VBC with venture debt may be subject to a blanket lien or negative pledge that prohibits it from granting security over its assets, including project equipment or accounts. Second, investor protective provisions may require preferred-stockholder or board approval before the company issues guarantees, grants liens, or incurs liabilities above a threshold. Offering credit support that the VBC’s own financing documents do not permit is a fast way to lose credibility with a counterparty, and potentially to trigger a default under those documents.

Surety, Insurance, and the Risk-Transfer Package

Surety bonds deserve particular attention where a VBC is performing construction, installation, equipment-supply, or development obligations, or where its own contractors are.

A performance bond is a three-party arrangement: the company is the principal, the customer or project owner is the obligee, and the surety stands behind the principal’s contractual performance. A payment bond separately protects subcontractors and suppliers against nonpayment, and on many public projects both are required by statute. Surety therefore gives a counterparty confidence that a qualified third party has evaluated the principal and is prepared to support completion or address default under the bond’s terms.

For a VBC, a surety bond is often more attractive than a letter of credit because it does not tie up a bank line or immediately restrict liquidity.

The instruments also work differently. A letter of credit is generally the issuing bank’s independent obligation to pay against a complying presentation of documents, regardless of disputes under the underlying contract. A surety bond, by contrast, is tied to the underlying contract, and the surety’s obligation typically matures only upon the principal’s actual default. Counterparties accustomed to letters of credit will notice the difference, which is why substituting a bond for a letter of credit is a point to negotiate rather than assume. Sureties also underwrite differently, assessing management, experience, cash flow, working capital, backlog, and the specific project, not simply collateral.

But a surety bond is not insurance for the company. If the surety pays a valid claim, it generally has reimbursement rights against the principal and any indemnitors under the applicable indemnity agreement. The surety may also require collateral, personal or sponsor indemnities, or limits on additional work.

The practical question for the VBC is therefore not simply, “Can we get a bond?” It is a range of questions, including:

  • Is the VBC bondable at the required amount?
  • What indemnities or collateral will the surety require?
  • Will the VBC retain sufficient bonding capacity for additional projects and changes to the scope of work?
  • Does the bond’s penal sum match the actual risk?
  • Are the bond terms, the underlying contract, and the change-order process aligned?
  • Will the obligations affect the company’s liquidity, future financing, or exit options?

A well-structured surety package can materially enhance a VBC’s execution credibility for current and future projects. A poorly crafted one can create unnecessary contingent obligations that surface as issues in the next financing round or M&A diligence process.

Insurance solves a different problem. It transfers specified risks, subject to policy terms, exclusions, deductibles, and limits. Depending on the project, coverage may include builder’s risk or construction all-risk, property, cargo and transit, third-party liability, professional liability, cyber, delay-in-start-up, and business-interruption protection.

The practical legal task is to coordinate the entire risk-transfer package. This includes contractual indemnities, limitations of liability, liquidated damages, and surety bonds and bond conditions.

The package also includes insurance requirements and policy exclusions, deductibles and self-insured retentions, additional-insured provisions, waivers of subrogation, and rights to proceeds and claims-control provisions.

No party should assume that insurance will cover a contract risk merely because the agreement requires a policy. The contractual allocation of risk, the policy language, the bond terms, and the financing arrangements must work together.

Review Your Contract’s Risk Protections

Completion Is More Than a Date

For infrastructure contracts, “completion” is usually a series of events rather than a single date. A project contract will often distinguish among milestones such as mechanical completion, commissioning, performance testing, substantial completion, commercial operation, and final completion.

The distinctions matter because they affect payment, liquidated damages, insurance, warranties, contractor and subcontractor obligations, revenue recognition, financing conditions, and the release of security.

A contract is not bankable simply because it has a completion date. It becomes more reliable when its construction and supply obligations align with the events that actually matter to each party.

For a VBC supplier, the key event is usually final acceptance: it triggers final payment, affects warranty periods, and releases retention and performance security. For a VBC buyer, the key event is the point at which the asset demonstrably does what the VBC paid for, tested capacity, reliable output, and the service standards its own customers and investors are counting on, and at which care, custody, and risk shift to the VBC. Once these milestones are achieved, a significant share of the project’s financial and liability risk falls away.

The acceptance provisions should therefore define clearly what completion means, the performance requirements to achieve it, who verifies it, which tests apply, how defects and punch-list items are handled, and what happens if performance falls short, whether through performance liquidated damages, a remedial period, a price reduction, or, in the worst case, rejection.

Contract Remedies Should Protect the Project

Counterparties understandably want meaningful remedies for delay, performance shortfalls, and poor execution. VBCs, meanwhile, need remedies that are substantial enough to create accountability but not so extreme that one problem threatens the entire enterprise.

A balanced remedies package may include:

  • Delay liquidated damages
  • Performance liquidated damages
  • Service credits or agreed fee reductions
  • Cure periods and escalation procedures before liquidated damages begin to accrue
  • Clearly defined change-order, claims, and dispute-resolution processes
  • Liability caps, exclusions of consequential damages, and carefully negotiated indemnity carve-outs
  • Relief events for force majeure, change in law (including tax law on longer projects), supply disruption, and delays caused or contributed to by the other party

The goal is a remedy structure that is enforceable, proportionate, and commercially survivable for the VBC.

For headline projects with large or well-known owners or customers, a VBC may decide that an aggressive risk profile is a reasonable price for the reputational rewards and future opportunities a successful project can bring. That can be a sound business judgment.

But a complex, high-value contract that requires the VBC to bear a disproportionate share of project risk can leave every party worse off at the first serious execution challenge. A VBC that cannot support the risk it agreed to bear may suffer far greater reputational damage than it would have by declining the project altogether, and the counterparty that insisted on those terms may find that its remedies are worth little against a company that cannot meet them.

Plan for the End, Including an Insolvent One

Termination provisions are where bankability is ultimately tested. Every infrastructure contract should answer, clearly and in advance, how each party can exit and what it is owed when it does. Several paths need attention:

Termination for convenience. Owners commonly reserve the right to terminate without cause. A VBC supplier should ensure that the termination payment covers work performed, committed procurement and cancellation charges for long-lead orders, demobilization, and an agreed measure of margin. A contractor working for a VBC buyer will expect the same, and may ask for security to back it.

Suspension for nonpayment. Contractors typically negotiate the right to suspend work after an uncured payment default, and many states’ prompt-payment statutes provide related protections. A VBC buyer should negotiate meaningful notice and cure periods so that a short-term funding delay does not halt the project.

Termination for default. Default triggers should be objective, with notice and cure periods proportionate to the obligation and coordinated with any step-in rights.

Termination payments. Each termination path should have a defined payment formula, an agreed treatment of retention and security, and a clear process for resolving disputes over the amount.

Insolvency deserves separate treatment, because it is precisely the scenario that most worries a VBC’s counterparties, and because the standard contractual answer often does not work. Many contracts permit termination if a party becomes insolvent or files for bankruptcy. In the United States, however, the Bankruptcy Code generally makes these “ipso facto” clauses unenforceable against a debtor’s executory contracts, subject to narrow exceptions, and the automatic stay restricts a counterparty’s ability to terminate or enforce remedies without court approval. A debtor may even be able to assume the contract and hold the counterparty to it, provided it cures existing defaults and gives adequate assurance of future performance.

The practical consequences are significant. A counterparty should not treat an insolvency termination right as its primary protection. It is better served by objective payment and performance triggers that operate well before any filing, early-warning covenants such as periodic financial reporting and notice of material funding events, and credit support that sits outside the VBC’s own balance sheet. A letter of credit or surety bond is the obligation of a third party, which is one reason these instruments carry so much weight with counterparties dealing with a growth-stage company.

Preserve Contract Continuity

In capital-intensive projects, the right to preserve the project can be as important as the right to recover damages.

If a VBC faces a funding shortfall, a material default, or financial distress, its investors, lenders, or affiliates, or the counterparty itself, may want the ability to cure defaults, assume obligations, or transfer the VBC’s scope to a party capable of completing it. Depending on the project, the parties may need to negotiate the scope of notice and cure rights before termination or suspension, direct agreements with critical suppliers, contractors, landlords, utilities, or customers, and step-in rights for lenders, investors, or the counterparty following uncured defaults.

The parties may also need to address assignment and novation mechanics, consent requirements for transfers of scope and changes of control, and the transfer or assignment of warranties, permits, equipment, IP licenses, and operating rights when the contract passes to a third party.

Continuity provisions also intersect with the VBC’s corporate life. Venture-backed companies raise capital, recapitalize, and get acquired. Anti-assignment and change-of-control clauses drafted too broadly can hand a counterparty an effective veto over the next financing or an exit. Carving out permitted transfers, to a successor by merger or acquisition, or to a financing party as collateral, while preserving the counterparty’s right to approve any replacement performer is usually a workable middle ground.

These provisions must be negotiated before performance distress arises. Project-finance structures commonly use security and step-in mechanisms so capital providers can preserve value and maintain continuity if the project company is not performing. For a VBC, the same concept can protect investors, customers, and counterparties, while also making a future financing or acquisition easier to execute.

Seven Questions Before Signing

Before entering a contract connected with a major infrastructure project, a VBC should be able to answer seven questions:

  • Funding: Is there a credible plan for deposits, milestone payments, cost overruns, and contingencies, including a late or smaller financing round?
  • Credit support: What support can the VBC, its investors, or a surety realistically provide, and do the VBC’s own financing documents permit it?
  • Completion: Are construction, commissioning, acceptance, revenue, and financing milestones aligned with the VBC’s ability to carry risk?
  • Risk allocation: Are liability, indemnity, delay, performance, and change-order mechanisms commercially and financially survivable?
  • Termination: If the contract ends early, for convenience, default, or insolvency, does each party know what it is owed and what security backs that payment?
  • Continuity: Can a lender, investor, affiliate, or replacement performer step in to cure defaults and preserve the project, without giving the counterparty a veto over the VBC’s next financing or exit?
  • Risk transfer: Do insurance, surety, security, and contractual remedies cover distinct risks without leaving material gaps or duplicating costs?

The Bottom Line

The question is not whether a VBC can provide the same balance-sheet assurance as an established infrastructure player. Often it cannot, and it should not imply otherwise.

The more useful question is whether the parties can create a credible, integrated arrangement of capital support, tailored credit enhancement, completion mechanics, balanced remedies, termination protections, insurance, surety, and continuity rights.

When those elements are negotiated together, a venture-backed company can preserve the speed and flexibility that make it a valuable project participant while offering counterparties the certainty they need to support a serious long-term infrastructure commitment. That is the point at which a growth-company contract begins to function like a bankable infrastructure contract.

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Frequently Asked Questions

Often, yes. A venture-backed company can address counterparties’ concerns through a coordinated package of project funding, credit support, completion milestones, contractual remedies, surety, insurance and continuity rights. The appropriate package depends on the company’s role and the project’s risks.

A bankable infrastructure contract gives relevant stakeholders reasonable confidence that the project can be funded, completed and operated despite foreseeable risks. It combines clear obligations, workable risk allocation, meaningful remedies and sufficient support for key delivery obligations.

A successful financing round does not, by itself, establish that a company can fund or perform a particular contract. Counterparties need to understand how available capital, payment milestones and future financing dependencies support the project’s obligations.

A surety bond may form part of an acceptable credit-support package, but substitution requires negotiation. The instruments operate differently, and a surety may require collateral or indemnities. The company should assess the proposed bond’s terms, liquidity implications and effect on future financing.

The company should review project funding, permitted credit support, completion and acceptance milestones, risk allocation, termination payments, continuity rights and the coordination of insurance and surety. These provisions should reflect its financial capacity and obligations to both suppliers and customers.

Yes. When a venture-backed company is the buyer or owner, the counterparty’s main concern is whether the company can pay through completion. When it is the supplier or technology provider, the concern is whether it can deliver a working asset. Many companies occupy both positions at once, so credit support and remedies should be structured for each contract separately.

Often not in the way the contract provides. In the United States, clauses allowing termination because a party becomes insolvent or files for bankruptcy are generally unenforceable against the debtor, subject to narrow exceptions, and the automatic stay limits enforcement without court approval. Counterparties are better protected by earlier payment and performance triggers, financial reporting covenants, and third-party credit support such as letters of credit or surety bonds.

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