Over the years, I’ve debated the pros and cons of venture debt with a number of people. Some entrepreneurs see venture debt as a safety net, with a big “Do Not Break Unless Emergency” sign in front of it. Other entrepreneurs view venture debt as a way to grow the business faster with minimal or no dilution.
During the Pardot days, we had a scalable business model and used venture debt to grow faster as part of our capital-light strategy. Our first line of venture debt was $1.5 million, and as the business grew, we secured a new line of credit for $3 million. By the time of our sale, we had used almost all of our debt capital in an effort to keep up with the market. It was the right thing to do for the business.
For Salesloft, the company raised several rounds of equity financing and increasingly larger venture debt lines of credit due to continual access to equity from institutional investors. Venture debt was primarily viewed as a safety net. When COVID hit in March 2021, we pulled down the line of credit, not knowing if it would be needed. In the end, it wasn’t, but it provided a cash cushion in case the COVID shock persisted.
This backdrop provides context for the announcement of our new private credit fund for growth-stage startups called Conductor Capital. The founders, Zack Mansfield and Dhruv Patel, have been in the venture debt world for many years, working for bank departments that specialize in startups. Many years ago, one of Zack’s clients was, in fact, Salesloft. Personally, I’ve written about venture debt many times and have used it in several startups (here, here, here). With Silicon Valley Bank, First Republic, and others going under last year, it was clear a gap had emerged in the market to help startups through venture debt.
Last year, after personally talking to several entrepreneurs about doing something on our own in the private credit space for startups, Zack reached out, saying he was working on a new firm. We began discussing the idea and decided to launch a new private credit fund focused on tech startups, called Conductor Capital. To support Zack and Dhruv, we recruited Kyle Porter from Salesloft, Tope Awotona from Calendly, and Nat Turner from Flatiron Health/Collectors. The big idea is: capital from entrepreneurs to support other entrepreneurs.
Today, we’re investing out of our first fund and have already closed our first loan.
Congrats to Zack and Dhruv on the launch, and please consider Conductor Capital when evaluating venture debt options. Conductor Capital is open for business.
Entrepreneur
via https://www.aiupnow.com
David Cummings, Khareem Sudlow
