PitchBook Analyst Note: Venture Debt a Maturing Market in VC

In 2020, US VC-backed companies received debt financings valued at more than $25 billion, the third consecutive year for the market to surpass $20 billion in venture loans. Although that figure pales in comparison to the broader VC market, just a decade ago venture debt struggled to reach companies, as startups received less than $5 billion in loans in 2010 and 2011. 

Venture debt financing counts have grown at a faster pace in the past decade than venture and private equity markets, highlighting how the alternative financing route is maturing into an attractive option for companies. Venture lending has benefited greatly from the surge in venture activity over the past few years, as more VC-backed companies equals more targets for loans. But beyond simply capitalizing on more companies, the unique characteristics of venture debt enables VC-backed companies to continue growth with less dilution and added flexibility with spending. 

This note looks at the growth seen in venture debt across different stages and sectors within VC and looks at what lies ahead for the space.