Venture debt is like a delicious sandwich that only costs ten cents, but occasionally explodes in your face. If I were running a startup, I don't think I'd ever take it.
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Why would I be biased? Venture debt doesn't compete with seed funding.
Because you’d rather follow on investments dilute yours than destroy them. I’d argue that vc’s desire for multiple founders is a similar calculation. Debt, unlike equity, can cause catastrophe, but to say there’s no place for it in startups is a head scratcher.
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The portfolio effect should make me *want* founders to make risky moves like taking venture debt.
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I disagree and you do too. Debt adds great risk without great upside. Follow on equity investments de-risk while maintain or increase upside. Suppose you're investing in Facebook and you see it's going really well and Zuckerberg says he wants to take on some debt.
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Suppose I’m selling a new consumer product for my startup (yes, I know that these are some of the shittiest startups). I get a PO from Walmart. You’d do an equity raise to buy purchase inventory there?
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