Venture Debt
A loan extended to venture-backed startups, typically alongside an equity round, that supplements capital without adding significant dilution.
Venture debt is a specialized loan product offered by banks and dedicated venture lending funds specifically to venture-backed companies, usually extended shortly after a priced equity round closes and sized relative to the equity just raised (commonly 20-40% of the round size). It typically comes with modest warrant coverage as an equity kicker for the lender, but far less dilution than raising the equivalent amount through a new equity round.
Venture debt is best used to extend runway, fund a specific capital-intensive initiative, or provide a cushion between equity rounds — not as a substitute for a company that fundamentally lacks a viable path to its next equity round, since debt still needs to be repaid and adds real financial risk if growth slows.
Use venture debt as a strategic extension of runway after a strong equity round, not as a rescue plan when a company is struggling to raise — lenders price and structure debt very differently (and less favorably) for companies that look financially stressed.
How much venture debt can a startup typically raise?
Commonly 20-40% of the most recent equity round size, though it varies by lender, company financial profile, and sector — companies with predictable recurring revenue generally qualify for more.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.