How it works
Venture debt is a broad term for lending associated with growth companies, often backed by institutional equity investors. Structures may include interest, fees, warrants, covenants, and milestone-linked draw conditions.
Where it can fit
The question is what the debt helps the company accomplish before its next funding milestone. Model cash runway, the expected equity plan, and how debt service changes that runway. The lender’s view of investors and future financing can affect the structure.
Look closely at the trade-offs
An interest-only period eventually ends. Debt can shorten the time available if growth or fundraising is delayed. Understand warrant dilution, material-adverse-change clauses, funding conditions, and whether undrawn commitments remain available.
Your next-step checklist
- Capitalization and investor support
- Runway forecast
- Milestone plan
- Warrants, covenants, and draw conditions
Crack this combination.
Can venture debt include dilution through warrants?
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Sources & further reading
This file draws on the following references. Product availability and requirements must be confirmed with the provider.
Levr: understanding venture debtLevr: reviewing a debt term sheet