Venture Debt

Venture debt is an attractive financing option for early and growth-stage tech companies. This form of alternative debt generally consists of a term loan lasting up to three years with warrants on company stocks.

Path to Mountains

Benefits of Venture Debt

An attractive financing option for VC-backed and non-VC-backed companies

Fuel Growth

Access growth capital with minimal equity dilution

Extend Cash Runway

Extend cash runway to achieve the next milestone

Increase Valuation

Bridge to the next round of financing at a higher valuation

Minimize Equity Dilution

Achieve a more balanced and less costly capital structure

Enhance Liquidity

Strengthen the balance sheet and enhance liquidity

Senior or Subordinated Debt

Can be subordinated to senior bank debt

When to Raise Venture Debt?

Alongside an Equity Raise

One of the best times to raise venture debt is alongside or immediately following an equity raise. Due diligence materials are in-hand, cash is in the bank, and momentum is strong. Companies can also lower their equity round amount and supplement it with a venture debt loan in order to minimize equity dilution.

Between Equity Rounds

Venture debt can  extend cash runway in between equity rounds so the company has more time to achieve its next milestone before the next equity raise. This can also result in a higher equity raise and less equity dilution. 

Fund Large Capital Expenditures 

When funding large capital expenditures such as buying equipment or acquisitions, venture debt can be used as a less expensive alternative to equity financing. 

The Insurance Policy

A venture loan provides an extra cushion in the event that a company needs more time to get to its next milestone. This would eliminate the need for an emergency bridge round or down round. Once the company is back on track, the company can proceed with its next equity round. 

Bridge to Profitability

Using debt to propel your company forward during a critical point of growth can eliminate the need for a final round of equity financing.

How It Works

Principal Amount

Average check sizes range from $1-5M

Monthly Payments

Pay fixed monthly interest payments

Fixed Term

Venture debt loans up to 3 years

Typical Venture Debt Agreement Structure

Amount:
$1-3M first tranche; up to $5M in total
Monthly Payment:
Fixed monthly interest
Term:
Up to 3 years
Control Features:
Bespoke
Financial Covenants:
Bespoke
Warrant Coverage:
Light
Security:
Secured by company assets

Who Should Apply for Venture Debt?

Venture debt is best suited for companies that are revenue-generating. 

While venture debt can play a supporting role in early-stage companies who have recently raised an equity round, this form of financing is easier to secure for more established startups that are creditworthy through significant assets or cash flow. While some lenders do accept non-VC-backed companies, lenders do prefer companies that have secured at least one round of venture capital financing.

Detailed examination
Seeking:
$1-3 million in first round; up to $5 million in total
ARR: 
At least $2.5 million; or generating annual revenues of at least $4 million
Regions:
United States
Canada
United Kingdom
Sectors:
Primarily technology;
Open to high-growth companies in other non-tech sectors
Management:
Proven entrepreneurs with substantial ownership positions in their own businesses

Ready to get started?

Submit an online application form