As the cliché goes, the road to success for a startup isn’t a straight path. What this means for financing companies is that cash needs can come earlier than expected and plans can take longer than expected.
It also means that opportunities can present themselves outside of the equity funding cycle. Suppose a fast growing company finds traction in a new market and wants to build out some development and marketing quickly. To do this it needs some extra cash but not enough to warrant a full equity raise.
The choices are to allocate capital from other parts of the business (ie, slow down somewhere else) or possibly take an inside round or an investor bridge. The founders and management may not like the inside round or bridge ideas.
In this case a venture loan can offer a quick solution to bringing capital in for the new projects. The company may be able to borrow between rounds and with the loan, prevent setting a valuation until the next equity round.
Borrowing between rounds to fund new growth projects can be a good use case for venture debt.