Publication

Venture Debt Financing: Determinants of the Lending Decision

2016
Journal Articles

Abstract

Venture debt lending is a form of start-up financing that lies at the intersection of venture capital and traditional debt. We analyze the lending decision criteria of 55 senior U.S. venture debt lenders (VDLs) using a discrete choice experiment in order to understand how VDLs overcome barriers that traditionally hamper start-ups’ access to debt. We find, first, that the provision of patents as collateral is as important as the provision of tangible assets to lenders. Second, VDLs showed a marked preference for start-ups that offered warrants. Third, venture capitalists' backing substitutes for a start-up's positive cash flows.

Official source

https://infoscience.epfl.ch/entities/publication/825e935a-46cc-449a-90fd-162f2c948979

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2016
Journal Articles

Abstract

Official source

https://infoscience.epfl.ch/entities/publication/825e935a-46cc-449a-90fd-162f2c948979

About this result

Related concepts (32)

Venture capital

Venture capital (commonly abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth (in terms of number of employees, annual revenue, scale of operations, etc). Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake.

Debt

Debt is an obligation that requires one party, the debtor, to pay money borrowed or otherwise withheld from another party, the creditor. Debt may be owed by sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest. Loans, bonds, notes, and mortgages are all types of debt. In financial accounting, debt is a type of financial transaction, as distinct from equity.

Asset

In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset). The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.