Venture Debt
A form of debt financing provided to venture-backed companies, typically used alongside or between equity rounds to extend runway without additional dilution.
Venture debt is structured as term loans or revolving facilities with warrants attached, providing lenders equity upside alongside interest income. It serves as a complementary financing tool — not a replacement for equity — allowing companies to extend their cash runway, finance specific growth initiatives, or bridge to the next equity round at a higher valuation.
Key providers include Silicon Valley Bank (now part of First Citizens), Western Technology Investment, and specialized venture debt funds. The warrants typically represent 0.5-2% of the company's equity.
Frequently Asked Questions
What is venture debt?
Venture debt is debt financing for venture-backed companies, structured as term loans with warrants. It extends runway without equity dilution, complementing rather than replacing venture capital.
How is venture debt different from traditional bank loans?
Venture debt is available to pre-profit companies based on their VC backing and growth trajectory, not traditional creditworthiness. It includes warrants giving lenders equity upside alongside interest income.
When should companies use venture debt?
Venture debt is most useful for extending cash runway between equity rounds, financing specific growth initiatives, or bridging to a future equity raise at a higher valuation — minimizing dilution for existing shareholders.
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