When it comes to gathering expert advice and opinions, there’s nothing quite like a roundtable. We recently invited Clare Mitchell, Director of Fintech at HSBC Innovation Banking, and Itxaso del Palacio, General Partner at Notion Capital, to lead a discussion about equity fundraising and venture debt for finance leaders of startup companies.

Raising capital is never just about the money. It’s about control, growth, timing, and long-term impact. Whether you’re eyeing your next equity round, considering venture debt, or debating how to blend both in order to reach the next milestone, this guide is packed with the expert advice and information you need to make a decision. Let’s get stuck in.

Back to basics: what’s the difference between equity fundraising and venture debt?

What you need to know about raising venture debt

Let’s now zoom in on venture debt. The first thing to be aware of is that venture debt is not a replacement for equity, it’s a complementary tool.

As Clare highlighted during the roundtable discussion, the vast majority of the time lenders will want to see that some equity has been raised before they will even discuss debt raising. Why? Simply because debt needs to be repaid, and debtor companies must demonstrate means to do so.

There are three main ways that companies make the money required to repay debt:

• Raising future equity 

• Achieving an exit

• Reaching profitability

So, when considering venture debt, you need to demonstrate not only how you are going to use the debt, but how you are going to reach one of the outcomes that allows you to meet your repayment terms.

When should you secure venture debt?

It might seem unnecessary or odd to seek debt just after an equity raise, but as we learned during the roundtable discussion, that's exactly when you’re in a position of strength, allowing you to negotiate better terms and lower costs. When you really need flexibility — say, between rounds or when eyeing an acquisition — your hands are tied because your balance sheet’s already weighed down.

Key considerations:

• What milestones are you aiming for (next raise, exit, profitability)?

• How much debt do you actually need?  It's easy to get excited about big offers, but overleveraging too early can backfire badly.

What's the right equity-to-debt balance?

According to our expert speakers, every business and sector is different, making it difficult to provide a single equity-to-debt ratio. However, Itxaso and Clare agreed that 20-40% debt against equity is fairly typical, and should buy you an extra 6-8 months of runway if managed properly.

Key considerations:

• Is it too soon? One major mistake that our panellists see is companies trying to raise debt too early in their journey. 

• What would investors think? When a liquidity event happens, debt gets paid first. Consider the perspective of future investors before rushing into large amounts of potentially off-putting debt.

Venture debt or equity? 6 top tips for making the right choice

1. Venture debt works best when you're already in a strong position

“Don’t use debt to fix a weak business — use it to extend a strong one.” — Venture Debt Provider

This point came up time and time again during our panel. Venture debt isn’t a lifeline for struggling companies but a multiplier for ones with momentum. You’re more likely to secure debt (and get better terms!) when:

• You’ve recently raised a round from reputable VCs

• You’ve got solid gross margins and a predictable revenue model

• Your metrics are on track, but you want flexibility

Think of it like this: Equity fuels the rocket. Debt gives you more airtime.

2. Raise when you can, not when you’re desperate

“The best time to raise debt is when you don’t really need it.” — VC Partner

It might sound counterintuitive, but a primary concern for lenders is risk. If your cash runway is already tight and you try to raise debt, you’ll either get bad terms or no offer at all.

Instead, it’s your responsibility as a finance leader to:

• Start conversations with lenders right after raising equity, or when you’ve hit key revenue milestones

• Pre-qualify with lenders early, so you know what’s possible ahead of time

• Use debt to de-risk your next raise, not scramble into one

3. Dilution is forever — debt is temporary

“That £2M facility helped us avoid giving up 8% of the company.” — CFO at a growth-stage SaaS

Founders often underestimate how painful dilution can become after multiple rounds. Taking on a manageable amount of debt can reduce how much equity you need to give away, especially if you’re just looking to:

• Boost cash reserves

• Fund marketing experiments

• Buy time until the next up-round

It’s not about avoiding equity entirely — it’s about using less of it.

4. Not all debt is created equal

Different types of debt suit different use cases. The panel broke it down:

Each debt type has pros and cons around cost, speed, and control.

5. Be the voice of reason for your founders

"Founders tend to invest based on growth instincts... you need to guide them through the realities of dilution." — Itxaso del Palacio

Founders sometimes behave based on personal preferences or gut instincts, but as a CFO, you need to be able to help guide them through the realities of debt and equity financing. Managing expectations, especially during an equity raise, is a challenging but important aspect of your role.

6. Plan ahead, for both equity and debt raising

“Plan, plan, plan, plan. Really look at your forecast, look at the plan that you have, go out to market and speak to different lenders. Start getting the sentiment check.” - Clare Mitchell

CFOs must always be one step ahead for the next round of funding — whether that’s equity or debt. What does that look like in practice?

• Having a clear financial strategy

• Understanding your company’s funding needs

• Building relationships with both equity investors and debt providers ahead of time

👀 Audience Q&A highlights

Our roundtable concluded with an interactive Q&A, giving all attendees the opportunity to ask Clare and Itxaso their burning questions about venture debt and equity fundraising. Here’s a few of our favourites.

Q: Can you raise debt before your Series A?
A: Rarely. Most lenders want to see VC backing before deploying meaningful capital. There are some exceptions, like revenue-based models or asset-backed deals.

Q: Can debt help bridge a gap between rounds?
A: Yes — if the gap is short and your fundamentals are strong. But remember, don’t use debt to delay difficult decisions.

Q: How much debt is too much?
A: It depends on your burn and runway. But a healthy rule of thumb is enough debt to extend by 6–12 months without locking you into repayments you can’t manage.

📍 When venture debt makes sense

✅ You’ve got predictable revenue (SaaS, fintech, marketplaces)
✅ You’re close to a major milestone or inflection point
✅ You don’t want to dilute more before hitting that milestone
✅ You’ve got strong backing from institutional investors
✅ You’re planning to raise a bigger round in 6–12 months and need extra runway

🚫 When it might not make sense

❌ You’re already highly leveraged
❌ You don’t have clear runway to next milestone
❌ You’re not confident you can raise equity next
❌ You’re using it as a fallback, not a strategic tool

"Debt isn't a parachute for a falling plane — it’s fuel when you’re already airborne."

📎 Final thoughts

Raising capital is about more than simply getting money in the bank — it’s about buying time, creating optionality, and staying in control of your journey. Whether you go the equity route, add some debt, or combine both, the most important thing is to make sure every penny raised helps you build a stronger business — not just a bigger cap table.