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Why we picked it 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.
Thinking Through Venture Debt: What It Is and How It Works
From Airtree Ventures (Open Source VC) by Airtree Ventures 12 min read
- Venture debt is calibrated to your last equity raise (roughly 25-35 percent of the round), so it extends runway without adding dilution, but only after you have proof of traction
- Breaking a covenant can trigger premature default, so model covenants before signing, not after
- It is dangerous precisely when you need it most: high burn, sub-12-month runway, or unpredictable cash flow means you should not be borrowing