Securing Capital to Help Achieve an Attractive Exit Valuation

Valuation is the name of the game. The question is, how do you create it? When you engage a client that is looking to exit within the next 1-3 years, it’s not a quick conversation, it is a lengthy process determining where they fit in the market, what the client is worth to an acquirer and how to best maximize their value to get there. Typically, when a founder is looking at exit options, they are not looking to go through another dilutive equity round, but they likely still need capital; enter: Venture Debt. 

Venture Debt is a commonly used tool by companies that are considering exit avenues over the coming years. It is an ideal solution for adding the capital required to invest in continued growth while avoiding taking the dilutive hit of another equity round. Developing a proper exit strategy can take months, if not years, to execute. It requires capital and venture debt lenders love providing capital that helps drive a company toward an exit. This is often an overlooked aspect of venture debt. 

As an advisor focused on exit strategies, it is important to keep in mind that venture debt is not like bank debt or SBA financing, and not all venture debt requires the big VC names behind the company to secure it. Companies with some tired equity investors, slightly slowed growth, and those looking for strategies to scale toward an exit are perfect candidates for venture debt financing. The cash flow provided by venture debt financing, provides opportunities to invest effectively in true growth strategies for the company. 

Using debt as a liquidity tool maximizes value for all parties. It prevents founders from being diluted any further from equity, prevents VCs from investing any more unwanted capital, and assists M&A advisors with maximizing their clients’ value towards an exit. 

As a tool that benefits so many aspects of companies moving towards an exit strategy, venture debt is a tool all companies, investors and advisors in the venture space should consider.