CA Final · Advanced Financial Management · Startup Finance
A startup with recurring revenue has already raised equity and wants to extend its runway without significant further dilution. It borrows from a specialised lender, which also receives warrants to buy a small number of shares. Which source is this?
Venture debt is correct. It is borrowing by an already equity-funded startup from a specialised lender, usually with warrants attached, so the company extends its cash runway while diluting founders far less than a fresh equity round would.
- AVenture debtCorrect
- BCrowdfunding through donations
- CBootstrapping from founders' savings
- DInitial public offering
Explanation
Venture debt is a loan to venture-backed startups, often with warrants as an equity kicker, used to extend runway with limited dilution. Bootstrapping uses own funds, donation crowdfunding gives no repayment or equity, and an IPO is a public equity issue.
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