Does venture debt affect our valuation?

Not the reported valuation, but investors evaluate total capital raised. Heavy debt on the balance sheet can complicate the next equity round.

Warrant coverage — how to negotiate?

3-5% is founder-friendly; 10-15% is common for higher-risk profiles. Negotiate based on your creditworthiness and the competitive dynamic among lenders.

What happened to SVB and how does it affect this market?

SVB's failure in 2023 shifted the market to Hercules, TriplePoint, and newer entrants. Terms have tightened; documentation is more rigorous. Rate spread has widened.

Venture Debt: When It Extends Runway and When It Kills You

Venture debt looks cheap next to equity. It's not — the covenants and warrant coverage change the math. Here's when it makes sense.

Venture Debt for Startups

Venture debt is a real tool for the right situation: extending runway between rounds without dilution. Used wrong, it accelerates the death of struggling companies by forcing repayment when you can least afford it.

How it works

A specialized lender (SVB successors, Hercules, TriplePoint) provides a term loan alongside your equity round. Typical terms: 20-40% of the last round size, 3-4 year term, interest-only for 6-12 months then amortizing, plus warrant coverage of 3-15% of loan size.

When it makes sense

You just closed an equity round and want 6-12 extra months of runway. You have predictable revenue that comfortably covers debt service. You're 12-18 months from a defensible next round. You want to hit specific milestones before raising equity again.

When it doesn't

You're already struggling and using debt to delay a hard conversation. Your revenue is unpredictable. You have no clear path to the next equity round. You're using debt to fund growth experiments (equity is better for that).

The covenants matter more than the rate

MAC (material adverse change) clauses can accelerate the loan. Financial covenants (cash minimum, revenue targets) trigger default if missed. Read every covenant carefully — the rate is 8-12% but the covenants can force you to pay everything back tomorrow.

Frequently asked questions

Does venture debt affect our valuation?: Not the reported valuation, but investors evaluate total capital raised. Heavy debt on the balance sheet can complicate the next equity round.
Warrant coverage — how to negotiate?: 3-5% is founder-friendly; 10-15% is common for higher-risk profiles. Negotiate based on your creditworthiness and the competitive dynamic among lenders.
What happened to SVB and how does it affect this market?: SVB's failure in 2023 shifted the market to Hercules, TriplePoint, and newer entrants. Terms have tightened; documentation is more rigorous. Rate spread has widened.