Venture Debt Is On The Rise for Tech Startups📈
Founders, find out if debt is a viable funding option for your startup👇
In November 2020, Udacity used debt to raise $75 Million.
Why'd they include debt funding in their latest round?
🔹Debt raises capital without diluting ownership as much as VC
🔹Debt has predictable costs and a lower cost-of-capital
🔹No new valuation is required, no new board seats are (typically) given up
🔹Debt provides leverage to your business, potentially increasing the upside
returns
But, there are drawbacks to taking on debt:
🔻Interest payments can ground a startup if revenue slows because debt is
secured by company assets
🔻Debt underwriters expect their money in 15-18 months vs. 5-8 years for most VC
funds
🔻Debt lenders don't provide value-add like business advice, networking, and
recruiting like some VCs do.
Venture debt complements VC, but it doesn't replace it.
It's rare that a startup will be issued debt before receiving a few rounds of VC
funding...
That's because debt lenders operate at lower risk thresholds than VCs, and
therefore need to have surety that you'll pay them back.
Are you / would you consider taking on debt? Why or why not?
Comment below and let's talk alternative funding solutions👇
#founders #fundraising
Posted by Nathan Beckord on LinkedIn
link: linkedin.com/in/nathanbeckord
Founders, find out if debt is a viable funding option for your startup👇
In November 2020, Udacity used debt to raise $75 Million.
Why'd they include debt funding in their latest round?
🔹Debt raises capital without diluting ownership as much as VC
🔹Debt has predictable costs and a lower cost-of-capital
🔹No new valuation is required, no new board seats are (typically) given up
🔹Debt provides leverage to your business, potentially increasing the upside
returns
But, there are drawbacks to taking on debt:
🔻Interest payments can ground a startup if revenue slows because debt is
secured by company assets
🔻Debt underwriters expect their money in 15-18 months vs. 5-8 years for most VC
funds
🔻Debt lenders don't provide value-add like business advice, networking, and
recruiting like some VCs do.
Venture debt complements VC, but it doesn't replace it.
It's rare that a startup will be issued debt before receiving a few rounds of VC
funding...
That's because debt lenders operate at lower risk thresholds than VCs, and
therefore need to have surety that you'll pay them back.
Are you / would you consider taking on debt? Why or why not?
Comment below and let's talk alternative funding solutions👇
#founders #fundraising
Posted by Nathan Beckord on LinkedIn
link: linkedin.com/in/nathanbeckord