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Venture Debt

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  • Adair Morse

Abstract

The provision of venture debt financing to growth-oriented startups which are backed by venture capital (VC) equity has been a bit of a puzzle given the lack of positive cash flows or traditional collateral of such startups. This short paper lays out the hurdles for debt to overcome to be a viable source of finance and casts the three types of venture debt – patent loans, venture leverage, and bridge loans – as solutions to such hurdles, casting the literature in terms of financial innovation. Finally, the paper addresses the risks implied by venture debt and discusses whether the demise of Silicon Valley Bank speaks to whether innovation ecosystem risk transmutes to the financial system through debt and the extent to which innovation ecosystem risk remains unstudied.

Suggested Citation

  • Adair Morse, 2024. "Venture Debt," NBER Working Papers 32183, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32183
    Note: CF PR
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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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