Comments on: Venture Debt http://truthonthemarket.com/2007/02/19/venture-debt/ Academic commentary on law, business, economics and more Sat, 11 Feb 2012 12:44:26 +0000 hourly 1 http://wordpress.com/ By: Doug Chartier http://truthonthemarket.com/2007/02/19/venture-debt/#comment-6591 Thu, 22 Feb 2007 18:44:48 +0000 http://www.truthonthemarket.com/2007/02/19/venture-debt/#comment-6591 I agree that venture debt can introduce the problems you pose, and I’m curious how it plays out in practice. On your first point, I wonder what sort of repayment structure the venture debt firms require. It would seem sensible that they require reduced/no payments initially when most of the start-up’s cash flow should be re-invested in the company’s growth, and more later on when it can afford it.

As to your second point, I agree with Bill that it seems that the amount of debt assumed would be important. I also wonder if the presence of venture debt (to the extent it induces investments that would not be made otherwise) could attract some traditional VCs, depending upon the strength of the venture debt firm. Like any VC, the venture debt firms could bring industry know-how, valuable networks, and credibility to the start-up. Other VCs may find that an invaluable asset. Of couse, depending upon the venture debt holder’s contractual rights and degree of influence, VCs may also worry that the venture debt firm will push the start-up toward excessive risk aversion.

Just some thoughts…

]]> By: Bill Sjostrom http://truthonthemarket.com/2007/02/19/venture-debt/#comment-6590 Mon, 19 Feb 2007 19:37:14 +0000 http://www.truthonthemarket.com/2007/02/19/venture-debt/#comment-6590 I think the attractiveness to VCs issue will depend largely on how much debt we’re talking. Some VCs may actually like the additional managerial discipline that comes from having some debt on the balance sheet.

]]>