Venture debt is a specialised segment within Private Credit, aimed at venture-backed, loss-making, high-growth, and capital-intensive businesses, distinguishing them from the broader, more established, and more profitable entities typically found in Private Credit. A dedicated team focuses on the deployment of venture debt products to these unique businesses.
This form of debt serves as either a replacement for or a supplement to equity financing in fundraising efforts, thereby minimising equity dilution for both management and institutional investors. Venture debt is generally structured as a growth capital loan with a duration of 3-5 years, offering flexible terms such as an initial interest-only period of 6-12 months. This flexibility allows businesses to leverage the capital for growth before commencing substantial repayments as they hit their growth milestones.
Venture debt is tailored for businesses that align with specific criteria:
Need to know:
Venture debt is a brilliant way for sponsor backed and high growth businesses to raise non-dilutive capital. The process is not always straightforward and can take time, plus of course, taking on debt will need careful consideration. If you are on a steep growth or innovation curve, then, so long as you get the right terms, then it makes sense either to delay the time to the next Series fundraise, increasing valuations as you go, or even allowing the ability to get to a point where further equity and dilution is not required.
The terms of venture debt can vary widely but generally include: