Silicon Valley Bank, which rapidly failed last Friday, didn’t just have billions in deposits in its coffers—it was also a big lender to the startup community.
Now the issue of venture debt is front and center as startups grapple with what will happen to the existing loans they had with SVB. Venture debt, a type of loan designed for fast-growing startups, has recently grown in popularity as it’s often the companion of equity funding but is much less dilutive to startup shares. Though it comes with its own structures to consider, high-growth and high-cash-burn startups have tapped venture debt for a variety of reasons, in many cases to bolster their financial position or avoid a down round as equity markets have grown chillier in the past year and the economic outlook remains murky. The venture debt question is important for companies because “it impacts that liquidity and runway of a certain category of startups,” Arjun Kapur, founder and managing partner of Comcast’s Forecast Labs, told Fortune.
