It was venture debt. It should never be used to save a company from financial trouble.
However, when venture capitalists began to pull back from equity investments earlier this year, because the booming market conditions made them realize that the price was too high, it became a topic of discussion again. From founders to investors to reporters, the talk among many in the industry was that we’d see a huge increase in venture debt this year.
But why would lenders want to lend to businesses that are being abandoned by their investors because of questionable financials—especially in a turbulent market? Well, they don’t. And despite what people think they do, Q3 data from Pitchbook shows that competitive debt will result in fewer deals and smaller loan volumes this year compared to last year’s strong equity market.
