Venture Debt: How to Use It to Propel Your Startup

Raising capital is hard. Growing fast is even harder. That’s why venture debt can be a great tool for founders: it provides additional capital without giving up equity, extends runway, and fuels growth—all while keeping your ownership intact. Here’s what you need to know to decide if venture debt is right for your startup.

Key Takeaways

Many founders are evaluating venture debt as a way to extend runway until the next raise.

Typical venture debt ranges from 6–8% of your company’s last valuation, with debt service ideally under 25% of net burn.

Choosing the right lender is critical—experience, patience, and a consultative approach can make or break the partners

How Much Venture Debt is Enough?

The amount of debt you take on should reflect your business momentum and milestones—product launches, signs of product-market fit, or entry into new markets.

• Typical venture debt: 20–40% of the last equity round, or 30 - 60% of your annual recurring revenue

• No more than 10% of your durable enterprise value

• Provides roughly 6 months of runway, on top of 12+ months of organic runway

Too much debt can burden your business, increase burn rates, and limit strategic flexibility. Done right, venture debt becomes a powerful growth engine—like strapping a jet to a train: it accelerates your trajectory without taking you off course.

When to Use Venture Debt

Venture debt works best for startups that:

• Have recent institutional funding

• Show clear growth and momentum

• Need additional runway without diluting equity

• Have a well-defined roadmap and financial plan

Think of it as a complementary tool to equity—not a replacement. Used strategically, it gives you more flexibility and negotiating power for future rounds.

7 Tips for Using Venture Debt Wisely

1. Extend runway, don’t replace it – ensure you still have organic runway to reach milestones.

2. Assess need carefully – just because debt is available doesn’t mean it’s the right fit.

3. Collaborate with your team, investors, and lender – transparency ensures mutually beneficial terms.

4. Vet your lender thoroughly – know how they react in down cycles and unexpected scenarios.

5. Model worst-case scenarios – understand how debt service impacts burn and runway.

6. Compare options near breakeven – other debt or financing may be more cost-effective.

7. Use an experienced venture debt lawyer – nuance matters; mistakes can delay closings and add costs.

Why the Right Lender Matters

Venture debt is more art than science. The best lenders don’t just focus on valuation—they understand your business, the innovation economy, and your growth trajectory.

When choosing a partner, look for the Four Cs:

1. Capital – Do they have the financial foundation to scale with you?

2. Commitment – Are they invested in your long-term success beyond the check?

3. Consultative approach – Do they understand your business and provide the right funding, not just funding for funding’s sake?

4. Consistency – Do they have a proven track record across multiple market cycles?

A patient, experienced, and consultative lender makes venture debt a strategic advantage, not a liability.

Forge Capital: Venture Debt Built for Founders

At Forge Capital, we help founders leverage venture debt to grow faster, extend runway, and protect ownership. Our team of entrepreneurs, investors, and operators works with you to structure debt that fits your business, your growth plan, and your vision.