Venture debt

A loan made to a venture-backed startup, usually alongside or after an equity round.

Example

$1M of debt taken after a Series A to extend runway without further dilution.

Important

Debt must be repaid on a schedule regardless of how the business is doing, and it usually sits ahead of equity if things go wrong. Cheap until it is not.

Related terms

• Venture capital (VC) — Professional investors who manage a fund of other people's money and invest it in high-growth startups in exchange for equity.
• Dilution — When new shares are issued, existing shareholders own a smaller percentage of the company than before.
• Runway — How many months your company can keep operating before it runs out of money, at its current rate of spending.

Lessons that explain it

• Debt and non-dilutive funding — Venture debt, revenue-based financing, grants and invoice finance. Money that does not cost equity — and does cost something else. (12 min)
• The funding stages, in order — Friends and family, angels, accelerators, pre-seed, seed, Series A and beyond — what each expects and what each is for. (12 min)
• Who the investors actually are — Angels, VCs, accelerators, family offices, corporate VCs, private equity, venture debt. They want different things — pitch them differently. (12 min)

All 176 terms in the Founder glossary