Venture Debt
Venture debt provides non-dilutive capital to venture-backed startups, complementing equity rounds without giving up additional ownership. Typically structured as 3-4 year term loans with warrants, venture debt extends runway between funding rounds.
What You Need to Know
Venture debt is a specialized form of financing designed for venture capital-backed startups that have already raised equity funding. Unlike traditional bank loans, venture debt lenders underwrite based on your investor backing, growth trajectory, and runway rather than profitability or hard assets. Typical venture debt facilities range from $1M to $50M+, usually sized at 25-50% of your last equity round, so a company that raised a $10M Series A might secure $3-5M in venture debt. The structure is usually a 3-4 year term loan with an initial interest-only period of 6-12 months, followed by amortizing principal payments. Interest rates range from 8-14%, significantly lower than the dilution cost of raising more equity. Most venture debt includes a small warrant component (0.1-0.5% of company equity) which gives the lender upside participation. The primary use cases are extending runway between equity rounds, financing specific growth initiatives (hiring, marketing spend), or bridging to profitability without another dilutive raise. To qualify, you typically need to have raised at least a Series A from recognized VCs, have 12+ months of runway remaining, and demonstrate clear product-market fit with growing revenue. The application process takes 2-6 weeks and requires financial projections, cap table, and investor references. Venture debt is not for pre-revenue startups, it's a sophisticated tool for funded companies that want to minimize dilution while accelerating growth.