Venture Debt
Debt financing for venture-backed startups that supplements equity fundraising — providing additional capital without the dilution of a traditional equity round.
What is Venture Debt?
Venture debt is a loan (not equity) specifically designed for venture-backed companies. It's typically offered by specialized lenders after a startup has raised a venture round, using that fundraise as evidence of viability.
Venture debt usually amounts to 25-50% of the last equity round. If you raised a $5M Series A, you might be able to access $1.5M-$2.5M in venture debt. The debt comes with interest payments and often includes warrants (the right to purchase a small amount of equity).
Unlike equity, debt must be repaid. This adds a fixed obligation to your monthly expenses but avoids dilution. It's a trade-off: more cash without selling equity, but a repayment obligation that increases your burn rate.
Why it matters
Venture debt can extend your runway by 3-6 months without dilution. For a company that just needs a bit more time to hit milestones before the next equity round, debt can be the cheapest form of capital.
However, debt adds risk. If the business doesn't grow as planned, you still have to make payments. Missed debt payments can trigger covenants and create serious problems — up to and including the lender seizing assets.
Example
You raised a $4M Series A and take on $1.5M in venture debt with a 3-year term at 10% interest. Monthly payment = ~$48,400. The $1.5M adds 7 months of runway at your current burn, but the monthly payment adds $48,400 to your expenses. Net runway extension = approximately 5 months.
How RunwayCal helps
RunwayCal lets you model venture debt as a commitment with monthly repayment obligations. See exactly how the additional capital and additional monthly cost change your runway calculation.
Common mistakes
- 1Taking venture debt without a clear plan for how to repay it or raise the next round
- 2Not modeling the impact of debt payments on burn rate and runway
- 3Assuming venture debt is free — interest plus warrants have a real cost
Model the true cost of venture debt
RunwayCal shows how debt payments affect your burn rate and runway — so you can weigh the trade-off between dilution and repayment.
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