You hit your last milestone and set big new goals. The plan was to have 18 months of runway from your Series A. Three months later, it’s looking more like 12.
Sound familiar?
This is a common challenge for high-growth founders. You need more capital, but the options often feel limited and costly. Many turn to an internal “bridge round.” A smarter alternative that protects your ownership and investor confidence? Venture debt.
A bridge round is short-term financing, usually from your current investors, to carry you to the next equity raise. It often comes as a convertible note: investors lend cash now, which converts into equity later at a discount (plus warrants or other perks to reward them for the extra risk).
While it can be quick, it comes with hidden costs that can hurt your future raises.
Venture debt is designed for high-growth, venture-backed companies. Unlike banks, lenders look at your growth trajectory and investor support, not just past profits.
It gives you access to capital without forcing you to sell more of your company at the wrong time, which is why many founders choose this path. Instead of turning back to equity investors too soon, founders can use venture debt to extend runway and buy time until hitting the next milestone. That way, you raise your next equity round from a position of strength, not urgency.
Here’s how venture debt provides a clear advantage over a bridge round:
Bridge rounds are dilutive by design. Venture debt, by contrast, usually costs only 0.5–2% in warrants, far less than the equity you’d lose in a discounted round.
Taking on venture debt shows operational strength. It shows you’re managing capital efficiently and gives new investors confidence rather than doubts.
With added runway, you can raise your next round when the business is performing at its best—after closing a big contract, showing product traction, or hitting growth targets.
Not every startup is a fit for venture debt. Lenders look for:
If your business has these qualities, debt can be a smart complement to equity, not a replacement.
While preventing a down-round or insider bridge is one of the strongest cases for venture debt, founders also use it to:
1. Will using venture debt scare off future VCs?
Most VCs view venture debt positively. It extends the runway their capital provides, helps the company hit key milestones, and can increase the valuation at the next funding round. A supportive venture debt partner acts as another signal of confidence in your company. Always keep your equity investors informed when you explore debt options; transparency is critical.
2. When is the right time to consider venture debt?
The ideal time is right after an equity round or when you have at least 12 months of cash runway. This is when you can secure the best terms and use the capital proactively—to accelerate a growth plan, make a strategic acquisition, or build a buffer—rather than reactively to avoid running out of money. Don't wait until you have less than six months of runway.
3. Can I still raise a Series A or B if I take on venture debt?
Absolutely. In fact, it can make your next round easier to raise. Venture capital investors view the smart use of venture debt positively. It shows you are capital-efficient and focused on minimizing dilution. By using debt to hit key metrics, you make your company more attractive and can command a higher valuation in your Series A, B, or C round.
