Venture Debt

A loan made to venture-backed startups, usually alongside or after an equity round, that must be repaid with interest but dilutes far less than selling shares.

Why it matters

Venture debt can extend runway or fund specific needs without giving up much ownership, but it adds fixed repayments that eat cash. It suits companies with a clear path to the next round, not ones scrambling for survival.

For example

After its Series A, a startup takes 10 crore of venture debt to extend runway and fund inventory, repaying it with interest while diluting almost nothing.

Worth your time

Thinking Through Venture Debt: What It Is and How It Works Airtree Ventures (Open Source VC) · article The best plain-English guide to when venture debt is a smart accelerant versus a trap. It gives the rules our answer leans on: take it right after an equity round when your bargaining power is highest, keep repayments under about 20 percent of opex, and model the covenants during the term sheet stage so you know your buffer. If your revenue swings or your runway is under 12 months, this piece tells you to walk away. Open airtree.vc →

Related terms

Runway Dilution Revenue-Based Financing

Go deeper

See how founders actually handle this on Raising your first round, part of the Starting Up hub.

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