Venture Debt Complements Equity Financing and Optimizes Capital Structure
Hercules debt financing is intended to complement equity. By using combinations of appropriate amounts of equity and subordinated debt capital, entrepreneurs, management teams, and equity sponsors can reach important development milestones.
Why Use Venture Debt
- Typically less dilutive than a new equity round and delivers more from equity dollars by providing the extra time or resources needed to reach key growth milestones
- Lengthens time between equity rounds giving entrepreneurial teams time to focus on building the business
- Provides additional negotiating leverage for potentially higher valuation and a more successful subsequent round of financing because key milestones have been met
- Helps venture capital funds leverage their capital, creating a smart financing solution for the management team and investors alike
How Venture Debt Works
- Creates an insurance policy against having to seek new funding at a lower valuation because key milestones have not been achieved.
- Provides the extra runway needed to reach key milestones, which in turn makes raising the next round of financing easier and helps boost valuation. If you meet the milestones and borrowing turns out to be unnecessary, paying interest on loans is significantly less expensive than financing the entire business with equity.