This involves financial strategy and planning from a top-down and bottoms-up perspective, enabling the business to be agile when it comes to measurement, insights and decision-making.
We create a roadmap for predictable growth, and continuously build and test the operating model to ensure consistency with the financial budget. This helps the business align the key interests of all stakeholders - founders, customers, talent, and investors. Six years ago, it was difficult to raise scaleup funding in Europe.
I saw many companies really struggle to get to scale and become profitable without additional funding, with investors and funding then becoming a self-perpetuating constraint.
The biggest challenge I encountered in working with European Series A and B software startups in recent years remains achieving go-to-market success on a global level. Venture debt , when used in combination with venture capital i. At the same time, it instils discipline around how money is invested inside the business, resulting in an overall much more capital efficient and sustainable business. It is a less dilutive form of capital which makes the company more attractive to not only founders, but also growth investors.
It's capital that a startup or scaleup can use to finance working capital or predictable growth - anything most directly translated into the enterprise value of a business. It could be in the form of a revolving credit facility - like a corporate credit card, but bigger. It could be a structured loan, very similar to taking on a three- or four-year mortgage on your business. You take on a certain amount of debt and have to repay monthly or quarterly the borrowed amount over a fixed term, as well as interest on top of that.
Ultimately, the objective is to provide less dilutive capital for founders and their companies, and also for investors who continue to believe in the long-term strategy yet want to relieve the pressure for the business to execute on it immediately.
Often, it provides more runway and time for the company to digest meaningful changes in strategy or leadership. Over two-thirds of the Bessemer portfolio companies used some form of venture debt. In many ways, venture debt is similar to regular debt.
The distinction is the assessment of risk-reward and resulting structure of the debt facility or loan. For an established or growth business raising debt, there are assets e. In addition, these companies typically generate positive cash flow from their core operations which means they can cover day-to-day costs including interest payments associated with borrowed capital.
For a startup or scaleup, in most cases, the company is not self-sustainable without new customers coming in or additional venture funding. There is no inherent value in the collateral i. Therefore rather than looking at debt-to-equity ratios as you would for established or growth businesses, for venture debt you evaluate :.
It is typically structured as a warrant i. There are different providers for this. And then there are specialist venture debt funds. The nature of the funding you want to go after usually depends more on when you go for it, and what you want to fund. Others might disagree, but I believe any sort of experimental growth in the business - launching a new product feature, opening a new market, moving to enterprise sales - these endeavors should be funded with equity.
And ideally, before you even do that, you optimize the capital inside the business. You use a solution like Spendesk to track your expenses very closely, and make sure you are maximizing the time difference between receiving money from customers and paying salaries. Venture debt. Four key benefits Here are the benefits of venture debt. Hands-off approach The EIB assumes no direct involvement in daily management.
Eligibility Find out if financial support might be available to you. Who is eligible. SMEs and mid-caps. Building a green future We have aligned all our financing activities with the principles and goals of the Paris Agreement, a commitment that builds a pathway towards low greenhouse gas emissions and climate-resilient development.
How to get financing Are you looking to accelerate the growth of your innovative business? Send all inquiries and questions to the Venture Debt team Get the eligibility form. Further reading Discover how our products help the economy, create jobs and promote equality. Products and services Our products and services focus on four areas: innovation and skills , small businesses , infrastructure , climate and environment , in the EU and developing countries. In addition to requisite highly trained finance personnel, we have on staff:.
Our portfolio management sets Trinity apart from other venture lenders. Upon close of funding, we work closely with our customers to provide value throughout the relationship. We have helped companies obtain additional equity and debt financing, fill executive management positions, and meet strategic partners.
If you are a growing venture capital-backed company and you are interested in learning more about venture debt financing, please contact us. When structured appropriately, venture debt can be an attractive financing option for the following reasons: It results in less equity dilution for entrepreneurs and investors.
It does not require a valuation to be set for the business. Venture lenders do not require board seats. The due diligence process is typically less exhaustive compared to equity.
Watch YouTube Video. When to Raise Venture Debt? With Equity Raise The best time to raise venture debt is concurrent with or immediately following an equity raise. Between Equity Rounds Venture debt can extend the cash runway of a startup company to achieve the next milestone achievement prior to their next equity raise, resulting in a higher valuation and less equity dilution.
As an Insurance Policy Venture debt can serve as an insurance policy to protect the company from potential mishaps or delays, thus eliminating the need for an emergency bridge round or penalizing down round and allowing the company to raise its next equity round once the company is back on track.
Fund to Profitability Venture debt can bridge a company to profitability. Download White Paper. Important Venture Debt Terms Below are some important venture debt terms for companies considering raising venture debt. The loan size should be determined by the amount of capital required and the amount of debt desired by the business. The loan duration , or term , typically consists of months and often includes an interest-only period followed by an amortization period which consists of principal and interest payments.
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