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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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.
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If a founder is capable of rationally making that decision, he/she doesn't need your advice on the topic then.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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I think that’s *the* point: the upside of taking debt is mostly the founder’s, because she gets to keep her equity. She only gets more and more diluted with addtl equity rounds, whereas other investors usually do their pro-ratas.
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The investors get diluted exactly as much. Investors have to pay for pro-ratas. Logically they're equivalent to separate investments — which they are for new investors in that round.
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