Startups value venture debt to supplement equity in any market climate.

• Venture debt can provide support to extend a company's runway and expand its valuation — while minimizing dilution for stakeholders.

Get up to date: The venture debt landscape has expanded in the past year with more banks and private, non-bank lenders entering the space.

• Okay, but: While non-bank lenders often offer options that have less structure, they can be more expensive. Even if lenders are more aggressive on terms, it's important to determine if they can prove to be a reliable partner for the long haul.

What you need to know: Previously, when evaluating a term sheet for venture debt, the information in the middle mattered most (i.e., rate and structure). But with more options, it's important for tech companies to evaluate the quality of the partner.

• Experience is key. Working with an experienced full-service banking partner is beneficial in good economic times — and bad.

In other words: Experienced banks remain a strong option for tech startups seeking venture debt.

Why it's important: Knowledgeable banks will approach each debt opportunity individually through an entrepreneurial lens. That means each solution is tailored to fit a company's specific circumstance, anticipating its needs and possible obstacles.

• Don't mistake an experienced banker for an experienced bank. A banker might have a long track record — but the bank they work for might be new to the venture lending space and still navigating the nuances of working with a growing venture-backed tech company.

To gauge a potential bank partner's experience and track record, tech companies should:

• Ask about the clients they've worked with long term at their current bank's platform through good and bad market cycles. Seek specific examples of clients that have used venture debt to their advantage through all stages of growth. Note the types of clients. You'll want to work with a lender with diverse experience across economic sectors, cycles and industries.
• Determine what other support a lender can bring to the table. For example, what kind of relationships in the technology ecosystem can they support you with? How accessible is the bank's senior and executive leadership?

• Understand how the lender manages relationships. It's ideal to work with the same banker throughout your company's life cycle.

The takeaway: In an environment where draw periods are more than a year and maturities are more than three years, the best-case scenario is working with a well-respected, tenured relationship manager at a bank with long-term experience in venture debt through both good and bad cycles.

• Tech companies that choose stable, well-aligned, experienced banking partners will be stronger in the long run.

See how Bridge Bank meets the criteria.