Venture Debt Hit a Record in 2025. Here Is How Founders Should Use It

US venture debt issuance reached a record 68.8 billion in 2025 while the number of borrowers stayed flat. That gap is the whole story, and it changes how growth-stage founders should think about their capital stack.

A record built on bigger checks, not more borrowers

The Runway Growth Capital and PitchBook 2025-2026 Venture Debt Review put US venture debt issuance at a record 68.8 billion in 2025. The number underneath matters more: deal count held roughly flat at about 1,000 transactions. Volume rose while the borrower count did not, which means the average facility got larger and the average borrower got later-stage and better-capitalized.

The deal-size distribution confirms the read. Median deal size rose to 5.5 million and the 75th percentile reached 27.7 million. Lenders concentrated capital into fewer, larger facilities for companies with revenue visibility and contracted cash flow, the same selectivity pattern visible across private markets in 2026.

Why the equity market pushed founders here

Venture debt did not get more popular on its own. It got more popular because the equity market concentrated at the same time. When most new venture capital flows to a short list of mega-funds and AI names, the median growth-stage company faces a thinner equity market and prices dilution accordingly.

So founders increasingly raise a smaller priced equity round and pair it with a debt facility. With a facility commonly sized at 20 to 35 percent of the last round, priced at roughly 8 to 15 percent all-in, and carrying warrant coverage usually under 2 percent of equity, the blended ownership cost of that stack runs materially below an all-equity raise of the same size for a company that qualifies.

The cost that actually matters

Founders misprice venture debt in both directions. The coupon is a known, modelable expense. The real risk is the covenant package and the amortization schedule colliding with a soft quarter. Across our advisory work in 2025 and 2026, the founders who get venture debt wrong are almost never the ones who misjudged the rate. They are the ones who took a facility their cash flow could not service through a downside case.

That is why the suitability test is sharper than the qualification test. Debt that buys a credible milestone, a higher next round, a profitability inflection, or a sale process, is well-placed. Debt that papers over a business that does not support its runway adds a fixed claim ahead of the equity at the worst possible moment.

Run it as a process

The lender base institutionalized between 2023 and 2026. Specialty BDCs, private credit funds, and the bank successors to the pre-2023 market now compete for quality borrowers. Hercules Capital alone reported a record 1.81 billion in new commitments in the first quarter of 2026. That competition is the founder's leverage.

A facility negotiated against three to five qualified lenders prices better on spread, warrant coverage, covenants, and amortization than one taken from the first lender to respond. Running the debt raise as a real process is the single highest-leverage thing a qualifying founder can do. Our full white paper breaks down the cost math, the qualification screen, and the four questions to answer before signing a term sheet.

Weighing whether to layer venture debt into your stack in H2 2026? Yanne Capital's deal team will run a no-cost structural review of your options. Reach out at contact@yannecapital.com or visit yannecapital.com/contact.