What Is a Hybrid Round?

A hybrid round (also called a “combo round”) is a financing structure that combines:

• An equity investment (from new or existing investors, VCs or others)

• A venture debt facility raised simultaneously or shortly after

Typical structure:

• Equity to reach a total of 12 months runway

• Venture debt to add additional 6-12 months runway

The goal is to reduce dilution while maintaining capital strength.

• As equity markets gradually rebound, valuations remain lower than their 2021 peaks, prompting founders to delay massive equity rounds.

• Instead, startups are increasingly using "Hybrid Rounds" (a mix of equity and debt) to extend runway and hit key milestones before raising their next major round.

• Strategic use of venture debt alongside equity minimizes founder dilution while providing the cash necessary to fuel growth and improve KPIs.

After a tough couple of years, venture capital equity markets are showing signs of a gradual comeback. But while the media focuses on modest rebounding in startup valuations, there is another, less obvious beneficiary of this market shift: Venture Debt.

Because valuations and revenue multiples are still lower than their historical peaks, many founders are deliberately delaying their next major Series A to C rounds. They prefer to sell less equity now, opting to revisit the equity market in 2026 or beyond when conditions are even more favorable.

To bridge that gap, founders are leveraging non-dilutive capital.

The Equity-Debt Tandem

For debt providers, the equity freeze that began in 2022 posed a massive challenge. Some credit analysis for startups relies heavily on the assumption of continued equity support. When that dried up, credit risk spiked, and lenders backed away or pushed up the pricing.

Now, with the equity market slowly reopening, lenders have regained their confidence. Knowing that some tech companies once again have access to future capital infusions, debt providers are actively approving more deals.

While debt is often viewed as an alternative to equity, the coming years will prove it is actually a complement.

Considering adding venture debt to your equity round?

Use our Venture Debt Assessment Tool to see how lenders are likely to evaluate your company and whether debt could complement your next round.

<Run the Venture Debt Assessment>

Why Are Hybrid Rounds Increasing in 2026?

1. Lower valuations compared to 2021

2. Founder dilution sensitivity

3. Lender confidence returning after equity stabilization

4. Equity round cycles take longer

5. Need to extend runway before next major round

For startups navigating this landscape, here is how debt is often being deployed strategically alongside equity:

1. The "Combo" Round to Reduce Dilution

Venture debt is increasingly used around the same time as an equity raise to optimize dilution. In most cases, the amount of venture debt a startup raises will be between 10 to 30 percent of the total raised during the equity financing. For example, instead of raising $10 million entirely through equity, a startup might raise $8 million in equity and $2 million in debt. This "Combo Round" allows founders to retain a significantly larger ownership stake while putting the exact same amount of cash on the balance sheet.

2. Pure Runway Extension

Startups are using debt to buy time. Whether investing in sales, product development, or operations, an extended runway provides the breathing room necessary to achieve valuation-boosting goals. Hitting those milestones before the next equity raise ensures much more favorable valuations.

3. Refinancing for Growth

Refinancing existing debt allows startups to reduce their overall interest burden, improve flexibility and cash flow, and acquire fresh funds to accelerate growth. Startups often refinance when they need a longer repayment period or wish to implement new grace periods with interest-only payments.

In short, the return of the equity market isn’t just good for equity investors- it is setting the stage for a much healthier, more flexible capital stack where founders can finally protect their ownership.

Considering adding venture debt to your equity round?

Use our Venture Debt Assessment Tool to see how lenders are likely to evaluate your company and whether debt could complement your next round.

<Run the Venture Debt Assessment>