Q3 data reminds us that venture debt is not a Hail Mary
Venture debt was never meant to be used to bail a company out of financial trouble.
And yet, when venture capitalists started to pull back from equity investing earlier this year because frothy market conditions made them realize that valuations were too high, it became a topic of discussion again. Across the industry, from founders to investors to reporters, the rhetoric among many was that we’d see a drastic rise in venture debt this year.
But why would lenders want to loan cash to businesses that are being abandoned by their investors due to questionable financials — especially in a turbulent market? Well, they don’t. And despite people thinking they would, Q3 data from PitchBook shows that venture debt will likely see fewer deals and less loan volume this year than during last year’s robust equity market.
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