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.

No rational founder would incur the additional risk of taking debt without corresponding upside potential.

Sorry but what are the risks? Intuitively it is money without dilution. Do you mean the risk of bankruptcy by non payment? But that only happen when you're broke anyway?