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.
Taking venture debt is different from raising an equity round.https://en.wikipedia.org/wiki/Venture_debt …
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Generally, it's a very risky move to take on debt before you have a sustainable business that generates profits. You need profit to pay back the debt on a schedule, unlike equity $$.
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appreciate u take the time to respond to questions.
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Yep yep yep. Avoid it like the plague. It’s a temptation for capital-heavy products... like - I dunno - a fleet of Pilatus PC-12 aircraft.
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So, so true.
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In my experience, debt financing adds more of a headache than it’s worth. It changes how you think about your business in a way that can initially be dangerously unconstrained and very constrained towards the end.
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In what situation does this blow up compared to an equity round?
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This just sounds like convertible debt.. Does VCs being the source chage that? Also, I get it when a bank provides this. For VCs who have equity in the firm to do this feels like such a poor vote of confidence. Sure, they’re running a business too - but still, it says a lot.
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