Explain Like I’m Five: What’s Venture Debt

If you’ve founded a startup that is growing quickly, you can sometimes take out loans instead of raising venture capital. What this does, is allows both you and your investors to keep more of your equity in the company.

In the long run, if your company is truly growing quickly, the equity will be worth much more than the interest you pay on the loan(s).

So you take out a loan, it lets you grow your business more before raising the next round of equity financing, and boom, you have more equity in your pocket, so do your investors, and you’ve been able to pay off the loans. Everyone wins.

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