How to think about venture debt | Summary and Q&A

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March 13, 2020
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How to think about venture debt

TL;DR

Many mid-sized companies are turning to debt-based financing instead of venture capital, with revenue-based financing becoming popular.

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Questions & Answers

Q: Why are mid-sized companies less likely to raise venture capital now?

Mid-sized companies are finding it more difficult to raise venture capital due to their size, leading them to explore alternative financing options such as revenue-based financing or debt.

Q: Is debt-based financing new for startups?

Debt-based financing is not a new concept, with established firms like Silicon Valley Bank offering it for years. However, there is now a greater availability of this type of financing for startups, particularly in the SaaS industry.

Q: What is the advantage of debt-based financing for SaaS companies?

Debt-based financing can provide SaaS companies with the necessary funds to make important hires, invest in customer success, and increase revenue. When used correctly, it can be a valuable tool for growth.

Q: What should startups be cautious about when using debt-based financing?

Founders should be careful not to treat debt-based financing as free money. It is crucial to remember that debt needs to be repaid, and it should be used strategically to fuel growth rather than spent excessively.

Summary & Key Takeaways

  • Increasingly, mid-sized companies are opting for revenue-based financing instead of venture capital for funding their growth.

  • Examples like Talkdesk show that companies can raise debt while still achieving significant growth and success.

  • This trend has gained popularity since 2015, with more options for debt financing available now, particularly for software-as-a-service (SaaS) companies.

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