Raising capital has always been tough for SaaS founders, but over the past few years, it’s only gotten harder.
VCs are funding fewer deals, valuations are under pressure, and investors are scrutinizing metrics like net retention, burn multiples, and payback periods more closely than ever. Even strong SaaS companies with recurring revenue and healthy unit economics often find themselves waiting months—or accepting more dilution than they’d like—just to close a round.
That’s where venture debt comes in.
For SaaS founders who need runway to hit milestones, fund growth, or bridge to the next equity raise, venture debt can be a smart, less-dilutive alternative.
SaaS has one of the best business models in the world: predictable revenue, high gross margins, and scalability. But those same strengths come with challenges when raising equity:
For many SaaS founders, this creates a frustrating cycle: growth demands capital, but equity isn’t always available, or it comes at a steep price. And even after raising equity, the growth expectations from VCs can be intense. According to PitchBook, that pressure is one of the reasons more startups are turning to venture debt., later-stage startups are increasingly turning to venture debt to keep up with those expectations and to avoid raising equity at lower valuations.
Venture debt is a loan designed for high-growth companies, especially SaaS businesses with recurring revenue and a path to profitability. Unlike traditional bank debt, it doesn’t require hard assets or profitability today.
For SaaS founders, venture debt works to extend runway or bridge to the next milestone.
Example: A SaaS startup raises $10M in Series A equity at a $50M valuation. Instead of raising another $5M in equity (and giving up more ownership), the company adds $3M in venture debt.
This capital allows them to:
The equity raise is preserved for long-term growth, while debt provides tactical flexibility.
Venture debt isn’t for every founder. But it often makes sense when:
Founder story: Elliot Bohn, CEO of CardCash, used venture debt to fund seasonal inventory rather than give up more equity. “Giving up equity to capitalize on a short-term opportunity, one that could be funded just as easily with debt, is a shoddy way to run business,” he explained.
SaaS companies often need capital before their revenue fully catches up to growth. Equity can be slow, dilutive, and difficult to raise in today’s market.
Venture debt gives founders another option: the ability to extend runway, fund key initiatives, and reach the next stage on their own terms.
The key is timing. Take on debt only when you have predictable ARR, clear retention, and a plan to deploy capital efficiently. Used wisely, venture debt can be the difference between raising your next round at a higher valuation, or giving up too much too soon.
1. How quickly can a SaaS company secure venture debt compared to raising equity?
Equity rounds often take 3–6 months (sometimes longer in tight markets). Venture debt can be secured in 4–8 weeks once you have financials in order. For SaaS companies with limited runway, the speed advantage is often one of the biggest draws.
2. Can venture debt cover SaaS growth expenses like hiring sales reps or scaling cloud costs?
Yes. Venture debt is often used to fund go-to-market expansion, customer acquisition, and infrastructure investments, expenses that equity typically covers. The key is making sure these investments improve unit economics, so the debt leads to measurable growth rather than just higher burn. debt.
3. Can venture debt be used as a complement to equity for SaaS companies?
Yes. In fact, that’s one of its most common uses. Venture debt is often raised right after an equity round—usually around 20–40% of the equity amount—to extend runway without extra dilution. For example, a SaaS company raising $10M in equity might add $3M in venture debt. This combination allows founders to reach more ambitious milestones before the next raise, which can improve valuation and reduce overall dilution.
