PRIVATE MARKETS, PLAINLY — A Founders Alley education series
Chapter 1 covered the ownership sold in the open. Chapter 2 climbed the debt ladder. Both halves of that funding rest on one thing being true: the asset at the center has to earn its keep. So this chapter goes all the way down to the smallest unit and asks the plainest question in the whole subject. What does one of these actually earn?
It is the right question for a moment like this one. By McKinsey's estimate, the world needs more than a hundred trillion dollars of infrastructure investment through 2040, and private capital is expected to carry a large share of it. That much money will chase a lot of stories. Unit economics is how you tell the stories from the assets.
Start with one unit
Every large build is made of small repeating pieces. A network is made of sites. A grid is made of substations. A pipeline is made of miles. The honest way to understand a giant project is not to start with the giant number at the top of the deck. It is to pick one repeating unit and ask three small questions about it. What does it cost to build? What does it cost to run? And what does it earn once it is running?
If one unit earns its keep, the big number is just multiplication, and multiplication is not where projects fail. If one unit does not earn its keep, no amount of scale fixes it, because scaling a money-losing unit just loses money faster. This is why serious investors always drill to the unit. The top of the deck is the story. The unit is the truth.
The two kinds of cost
The cost side splits cleanly in two, and the split matters. The build cost is paid once: the steel, the glass, the construction, the money spent before anything earns a dollar. The run cost is paid forever: the power, the people, the maintenance, the price of keeping the thing alive. A healthy asset has a run cost comfortably below what it earns, so that every month of operation pays for itself and chips away at the build cost. An unhealthy asset needs the story to keep going.
Notice how this connects to the debt ladder from Chapter 2. The build cost is what the expensive early money finances. The moment the unit is running and earning above its run cost, the risk has changed, and cheaper money becomes available. The economics of the unit are literally what the company climbs the ladder on.
The two kinds of earning
The earn side also splits in two, and this split is about certainty. Contracted revenue is money someone has already agreed to pay: a customer with a signed commitment to use capacity at a price for a period. Usage revenue is money that arrives if people show up: subscribers, buyers, traffic. Contracted revenue is worth more per dollar because it is more certain; usage revenue is where the upside lives because it can grow without a new signature.
A well-built asset usually stands on a floor of contracted revenue and reaches for usage revenue above it. When you read any projection, the first thing to separate is which dollars are promised and which are hoped for. Both are legitimate. Confusing them is not.
How to read a projection honestly
Every projection is a set of assumptions wearing a spreadsheet, so the quality of a projection is exactly the quality of its assumptions. The honest ones label themselves. A sourced assumption comes from real data, a census count, a market price, a signed contract, and it names where it came from. A judgment assumption is a considered guess, adoption rates, future prices, and an honest model says so out loud instead of dressing the guess in decimals. When a company shows you its unit economics, the label discipline is itself the diligence signal. The ones who grade their own assumptions are telling you how they think. The ones who do not are telling you too.
The worked example
Picture the same corridor-scale infrastructure company from the earlier chapters, and drop all the way down to a single site on its network. The site cost something to build, once. It costs something to run, monthly. And it earns two ways: a floor of contracted capacity that customers have committed to, and a reach of usage revenue that grows as more of the region connects. If that one site clears its run cost on the contracted floor alone, the usage layer is upside on a working machine, and the corridor is that machine repeated down the map. That is the whole analysis, done plainly, and you could do it for any build in the world with three numbers and the patience to ask for them.
Where this leads
You can now read a raise from top to bottom: who gets to own it, how the borrowing climbs, and whether the unit underneath actually earns. One question remains, and it is the one private markets were supposedly worst at. When the build works and the ownership is worth something, how does an owner ever turn it back into money? Chapter 4 is about how ownership moves.
Part of Private Markets, Plainly, a Founders Alley education series. Educational only. This material has been prepared for information and educational purposes only, and it is not intended to provide, nor should it be relied on for tax, legal, or investment advice. You should consult with your own tax, legal, and financial professionals for your specific situation. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or opinions of Finalis Securities, LLC. Securities offered through Finalis Securities LLC Member FINRA/SIPC. Founders Alley Capital and Finalis Securities LLC are separate, unaffiliated entities.