The process & preparation: Venture debt due diligence FAQs
A step-by-step guide to the timeline, due diligence checklist, and creating a winning debt pitch deck.
4
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answered
What is the typical Due Diligence Process for Venture Debt and what documents do lenders ask for?
The venture debt due diligence process typically takes 4–10 weeks and focuses primarily on historical and current financials and business metrics (KPIs), rather than on technology or future plans.
After signing an NDA, lenders typically request the following information:
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Investor deck
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Historical financials: Monthly P&L, Balance Sheet, and Cash Flow statements for the trailing 24 months
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Financial forecast: Monthly P&L, Balance Sheet, and Cash Flow projections for the next 24 months
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Unit economics: Monthly data for the trailing 12 months (e.g., LTV, CAC, ROI, cohort analysis)
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Customer breakdown
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Use-of-funds breakdown
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Cap table and details of equity raised to date
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Schedule of outstanding debt and its terms
What should I prepare before approaching lenders?
Before approaching lenders, you should:
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Organize your financials and KPIs: Lenders rely heavily on accurate and up-to-date data.
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Prepare a clear use-of-funds plan: Be ready to explain how the financing will be deployed and how the financing can improve your overall credit risk.
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Review the lender landscape: Understand the hundreds of lenders serving tech companies, their credit criteria and the various financing structures.
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Prepare a short list of lenders that are likely to be relevant. This can be challenging for those unfamiliar with the tech debt ecosystem.
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Ensure required documents are ready: gather all key materials lenders typically need to review your application.
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Start approaching selected lenders: Each lender will have its own application form to assess whether your company meets their basic requirements, often referred to as the “credit box.”
Venture Debt Pitch Deck - is it similar to equity investors deck?
The pitch deck for venture debt is very different from one used for equity fundraising. Lenders are less interested in the details of your technology, valuations or total addressable market and much more focused on your historical and current KPIs and financials.
While equity investors often focus on your future and how you may become a $1B company, debt providers analyze your past and present numbers to predict how your business will perform during the loan period. Lenders’ main concern is ensuring that you can repay the debt.
A specialized venture debt pitch deck is often structured as an Excel workbook containing 40–50 key figures about your business, financial situation, and funding history.
How do I find the right lenders?
These are some typical directions which tech companies take:
Market screening -
Most tech companies rely on referrals from investors, lawyers, advisors, or other startups. However, because matching with a lender requires aligning many KPIs and financial metrics, the probability of reaching the right lenders through ad-hoc outreach is very low.
Online research -
Some founders research venture debt structures online and identify lenders that may fit their business model, revenue profile, and stage. In practice, each lender applies dozens of non-public criteria such as minimum gross margin, growth rate, cash runway, customer profile, collections cycle, existing debt, recent funding round (size and timing), cap-table, customer concentration and many more. As a result, online research alone rarely provides sufficient accuracy.
VC referrals -
If you have recently closed a round with top-tier VCs, they can often help identify venture lenders that may be a good fit, as they work closely with some of them. However, these referrals might become far less relevant if the round closed over a year ago, as many lenders require recent equity financing.
Advisors and investment bankers -
Debt financing requires deep financial modeling expertise to navigate complex structures and lenders’ underwriting requirements. Traditional advisors and investment bankers often focus on large transactions and work with only a small number of debt funds and banks. Given that the startup and tech debt market includes hundreds of lenders, finding an expert with broad coverage and a deep understanding of each lender’s criteria is extremely difficult, especially for those who seek a check below $10M.