Reliable + Agile
To propel the BDC, it was important that this new source of growth capital be more flexible, and less regulated than traditional bank financing, but it also needed to complement existing sources of equity capital by offering a highly customizable, and low dilution source of financing.
This attractive new form of capital enabled some of America’s most promising, emerging growth, pre-IPO and M&A companies access to the exclusive world of investing, and allowed for average investors the opportunity to tap into these potential unicorns via Hercules Capital stock ownership.
We’ve learned firsthand, as entrepreneurs ourselves, faced with market skepticism of building a company with passion and perseverance, that it’s possible to endure, and achieve our goals. We count ourselves amongst you, great visionary entrepreneurs, and we know the first step to building any successful venture is surrounding yourself with the right people, the right partnerships, and strong financial allies to stick by you through tough times to see you realize your vision of building the next big thing.
Learn About Venture Debt
What is venture debt and venture lending?
Venture debt (aka venture lending) is a type of alternative debt financing to traditional commercial banks, and offers the ability to customize financing needs to meet your specific company requirements without commercial bank regulatory mandates, restrictive cash deposits, or covenant package. Venture debt is complimentary to your existing venture capital equity investments and provides lower cost growth capital to further extend your runway to success. It is typically used to fund working capital, operating expenses, and growth initiatives of venture capital and private equity-backed companies. Unlike typical traditional bank lending, venture debt is available at all stages of company development from startups, to expansion stage, to high growth companies that do not have positive cash flows or significant assets to use as collateral.
How does venture debt compare to traditional bank lending?
Venture debt is designed to be less restrictive, and far more customizable to your company’s unique needs than commercial bank financing. Debt doesn’t require that you deposit your operating account cash balances or have compensating balances as collateral to your loans, and there are no regulatory required restrictive covenants. Debt provides the ability to work through your growth challenges and restructure loans, unlike that of a regulated bank entity.
What are the benefits of venture debt compared to equity venture capital funding?
For companies at critical stages of development, debt can serve as a key financing option to foster growth, with minimal dilution of equity ownership. Our debt financing solutions are intended to complement equity.
What are the primary uses of venture debt?
There is no one-size-fits-all approach to venture debt, and each partnership is approached with finding the best fit on a case-by-case basis, however, there are four common use cases for venture debt that showcase its benefit.
Extend the runway
Gain more time between equity rounds to build the business and achieve critical milestones, creating potential for higher valuation.
Achieving milestones quickly in many cases means reaching a liquidity event like an IPO or M&A sooner.
Retain a larger ownership stake in the company prior to an IPO or other liquidity event.
Ability to raise capital with an agile partner that provides the flexible, custom financing solutions you require.
Transaction size $5 – $200 Million
Growth Capital Financing
- Runway extension (cushion to reach next milestones or additional milestones)
- Company, asset, or intellectual property acquisition financing
- Convertible, subordinated and mezzanine loans
- Domestic and international corporate expansion
- Management buy-outs and corporate spinout financing
- Revenue acceleration (sales and marketing development, manufacturing expansion, etc.)
- Vendor financing
- Accounts receivable facilities
- Cash flow
- Equipment acquisition
- Equipment loans or leases
- Facilities build-out and/or expansion (lab, manufacturing capacity, etc.)
- Working capital revolving lines of credit
IPO, M&A and Public Company Financing
- Bridge financing to IPO or M&A or technology acquisition
- Cash flow financing to protect against share price volatility
- Competitor acquisition
- Dividend recapitalizations and other sources of investor liquidity
- Pre-IPO financing for extra cash on the balance sheet
- Public company financing to continue asset growth and production capacity
- Short-term bridge financing
- Strategic and intellectual property acquisition financings
Experienced Industry Leader
With over a decade of experience in venture debt, and as the largest non-bank lender, Hercules is uniquely positioned to quickly create innovative financing solutions that perfectly fit within a company’s existing capital structure, and map to its business objectives.
Recognized as the industry leader, Hercules understands the flexibility entrepreneurial companies need, and has the experience to work closely with them, especially through challenging times, to help them reach critical milestones. Hercules’ deep sector expertise, and strong capital base have made Hercules the lender of choice for more than 380 innovative companies.
Industries We Serve
We work with over 1,000 leading Venture Capital and Private Equity Firms
Some of our recent partners include:
Why Successful Startups Choose Hercules
As entrepreneurs ourselves, we know what it’s like to start a business and raise the capital necessary to be successful. We understand that the best ideas are rarely immediately obvious, and that unconventional wisdom can’t be measured by formulas, or its benefits be captured in a spreadsheet.
That’s why our broad portfolio is as diverse as the innovative entrepreneurs we back. With an investor mindset, and an experienced team with a track record of success, Hercules continually strives to be highly responsive, creative and flexible in addressing each portfolio company’s unique capital requirements.