Venture debt is a loan to a company that, by any normal credit standard, should not be able to borrow: it loses money, has few hard assets, and may not exist in three years. Lenders make it work by lending against the equity behind the company rather than against its cash flows. They bet that the venture investors who just funded the round will keep funding it, and they take warrants to get some upside. The product works well as a runway extender and as cheap dilution protection between priced rounds. It turns dangerous when a company treats it as a replacement for equity. Around it sits a wider set of non-dilutive tools: revenue-based financing, recurring-revenue and receivables lines, equipment and GPU-backed loans, and government grants. Each has its own logic and its own failure mode. The 2023 collapse of Silicon Valley Bank, the industry's central lender and depository, showed how much of the ecosystem's plumbing ran through one institution.
What the study covers
- 1Overview: what venture debt is and is not
- 2Mechanics: the anatomy of a venture loan
- 3Key numbers
- 4Landmark cases and episodes
- 5How a venture lender underwrites
- 6Pitfalls
- 7How an expert thinks about it
- 8Glossary
- 9Related sections
Technical exhibits
Worked examples, checklists and case studies included with this study.
Worked Venture Debt Example
A $10m growth-stage term loan: amortization schedule, all-in cost, lender IRR with warrants, prepayment, and debt vs. equity dilution
Svb Collapse 2023 Case Study
How SVB failed in 48 hours, what it meant for startups and venture lending, and the lessons for treasury management
Revenue Based Financing Primer
RBF mechanics, effective-APR math (computed), the Clearco/Pipe cycle, and when RBF beats or loses to equity and venture debt