What is Venture Debt?
Venture debt provides tailored direct lending solutions for companies to speed up growth with minimal equity dilution. Venture debt is a niche strategy within corporate private debt and a complementary financing product to venture (equity) capital.
Benefits for Investors
- High returns and potential excess returns via “equity kickers” and/or revenue-linked pay-outs
- Risk-reduced access to technology driven growth companies without tying up long-term equity
- Regular pay-outs from interest-bearing instruments
- Diversifying asset in larger portfolios
- Benefiting from shortening innovation cycles and sales momentum
Benefits for Borrowers
- Leverage the company's equity
- Private debt avoids equity dilution
- Speed and flexibility of execution
- Potential for customized solutions
- Debt financing is cheaper than equity
- Requires less management distraction
- Debt investors do not request a board seat
- With less dilution founders keep up entrepreneurial drive