All Money Is Not Created Equal

Chapter 9Debt Is Not a Four-Letter Word

As someone who has been working in growth/venture debt for more than 12 years, I can say that there are three major issues that frustrate me: venture debt isn't widely known, understood, or sufficiently used; it doesn't get its due as a critical part of the financial infrastructure; and it doesn't have the reputation it deserves. At best, it's seen as a commodity. At worst, it's seen as a bludgeon, wielded by predatory lenders.

“The industry has come very far in terms of education around funding,” says Pixlee's Kyle Wong. “But when it comes to the details of funding versus the strategy of funding, I think there are still some missing pieces there.”

Wong makes a key point regarding strategy, particularly around debt. When venture debt is used appropriately, it's an instrument that helps companies avoid dilution, and extend their runway. I really hope that after reading this book founders have a better understanding of the basics of financing overall, but also have a decent level of knowledge about venture debt.

Venture debt hasn't been in use as long as venture capital has. The latter dates back to the mid-1940s, while venture debt goes back to the 1970s. (If you're interested in the history of either, there are plenty of books about venture capital; and regarding venture debt, there are some in-depth resources online.)

I sometimes refer to venture debt as “growth debt” because it more clearly indicates what the money is for; “venture” ...