Concept

Venture debt

Venture debt is a loan to a venture-backed company that is usually still burning cash. Lenders underwrite the probability of the next equity round, not EBITDA. It is senior and secured, does not convert, and usually includes a small warrant — useful runway if the equity story still holds.

Where founders get this wrong

• Treating venture debt as 'cheap capital' without modeling covenants, security, and warrant dilution.
• Drawing debt when the next equity round is unclear — lenders price that risk into control terms.
• Ignoring how debt sits ahead of common on a soft exit or restructuring.