Startups Turn to Venture Debt as Traditional Funding Sources Dry Up

Raising venture debt, rather than seeking venture capital, may be a key strategy for startups in 2023 as traditional funding sources dry up. PitchBook data shows that venture capital funding for startups fell 54% from Q3 2021 to Q3 2022, reaching $74.5 billion. As a result, many startups are turning to venture debt, which involves taking out loans to raise capital. Some believe that this trend towards debt will encourage a new generation of startups to focus on execution and market fit, rather than rapid growth or grandiose visions. Venture debt can also force companies to prioritize spending and focus on what is truly important. However, other investors think the funding crunch will lead to fewer, but more innovative, startups as founders must prove their worthiness for funding and clearly articulate their plans for success

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