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Hey everyone, as you know we’re always trying to get you a fresh opinion on the growth-stage market. This week, we’re speaking with one of the best investors in Europe on an asset class most people relate with equity. Let’s get into it!

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The Story

From banking to betting on founders

Brian's journey into venture debt was built on a strong foundation in tech lending. Starting his career in banking in Ireland before moving to Barclays in London, he specialized in lending to technology companies. It was there he noticed an interesting trend: Silicon Valley Bank (now HSBC) had launched in the UK and was bringing venture debt into the mainstream.

Intrigued by their approach, he jumped ship to SVB in 2014, spending eight years mastering venture debt before joining Claret to help scale their practice across Europe.

Today, as part of Claret's investment team, Brian helps deploy their €297M third fund, backing companies like Butternut Box, Hivebrite, and Holidu. But what exactly makes a company right for venture debt?

How (and why) to use venture debt

The biggest misconception about venture debt? It's not about survival – it's about optimizing growth. 

Brian sees three scenarios where venture debt makes perfect sense:

1) The Milestone Extension

• You've raised equity that get you 18 months runway, but you want to extend this by a further 6-12 months.

• Growth is good (50-70%) but slightly below plan of (80-100%)

• You need extra firepower to hit your next milestone

2) The Valuation Bridge When you raised at a 2021 valuation that's tough to match today, venture debt can buy you time to grow into that valuation rather than facing a down round. This has become particularly relevant in today's market, where many companies are finding their next round more challenging than expected.

3) The Dilution Defence Consider this scenario: you need to raise $10M, but current valuations mean significant dilution. By splitting between equity and debt, you can preserve ownership while keeping growth on track. 

Y Combinator also echoes Brian’s perspective as they have outlined the role that venture debt plays in the ecosystem.

Becoming Europe’s leading venture debt shop

What separates good venture debt from great venture debt?

It’s all about partnership. Unlike traditional lenders, they're comfortable with loss-making businesses – about 90% of their portfolio is burning cash. 

What matters is having a clear path to future equity, break-even, or exit.

Claret's typical deal structure reflects this partnership approach:

• 4-year loans with 12 months interest-only

• Monthly payments starting year 2

• Small equity warrants (usually <1%)

Not every company is right for venture debt. Claret’s team looks for specific signals:

Green Flags:

• Post-Series A with $5M+ revenue

• Product-market fit with strong retention

• Clear path to future equity or exit

• Strong unit economics

• Experienced CFO/finance function helps

Red Flags:

• Low growth/stagnation

• High burn rate without clear path to efficiency

• Complex cap table with concerning terms

• No clear future funding path

What This Means For You

If you’re a founder considering venture debt, he emphasizes some do’s and don’ts:

Do:

• Time it alongside or shortly after equity rounds

• Use it to extend runway to key milestones

• Consider it as part of a mixed equity/debt round

• Choose partners with strong founder references

Don't:

• Wait until you're running out of cash

• Take on debt when core metrics are declining

• Ignore the cash flow impact of payments

• Rush the partner selection process

Remember Brian's golden rule:

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See you next week!

Rahul & Aryaman