Molson Hart

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.

What?! I know there is an inherent bias coming from one of the largest early stage VC firms. I think there is a place and a time absolutely. I guess you could say growth at all costs, and I could say avoid dilution at all costs.

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.

The portfolio effect should make me *want* founders to make risky moves like taking venture debt.

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.