While many high-growth, venture capital (VC)-backed companies in the U.S. have been raising debt financing alongside equity rounds for decades, the knowledge, use, and associated comfort level with venture debt in German companies is very different from that in the U.S.

In an environment where choice in financing is ever-increasing, it is important for entrepreneurs to make sound forward-looking decisions that position the business strongly. It is not only the total cost of capital that must be considered, but also the most efficient mix of debt and equity, scalability and suitability of the
capital depending on the maturity of the company.

Raising venture capital through equity is a common way for many companies to invest further and grow: Venture investors or VCs acquire equity stakes in young, innovative, unlisted companies that are characterized by above-average growth potential despite insufficient ongoing profitability. But the cost of equity fluctuates significantly in the business cycles of the innovation economy. There are always phases when equity is in short supply on the market. But even in better times, it is generally true that debt capital is more cost-effective than equity capital, especially in the medium and long term.