The Rise of Venture Debt: A Response to the New Normal in the Entrepreneurial Ecosystem

The rise of venture debt as a financing alternative is reshaping the financing landscape, offering founders a way to access liquidity without diluting their company’s capital. In an era of investor caution and greater demands for efficient capital management, this option has emerged as a strategic tool for companies with traction and a long-term vision.

Over the past two years, venture debt has become a cornerstone in the financial strategies of high-growth companies. Its rising popularity responds to a structural change in the venture capital market: after record investments in 2021, venture capital has shifted toward a position where investment funds prioritize criteria like sustainable growth and the company’s runway.

Against this backdrop, venture has found fertile ground for growth, but it is not a one-size-fits-all solution for all companies. “Venture debt is not for small or early-stage startups. If you’re not growing 30% or 40% annually, you probably don’t have a good product-market fit,“ said Christhi Theiss, head of debt investments at BBVA Spark, during her speech at the panel ”Venture Debt: A Smart Alternative For Startups”, held as part of South Summit 2025.

Theiss’ statement captures the market consensus: venture debt is not designed to replace equity financing, but rather to complement it when there are solid metrics and scalability. “Venture debt is there to support smart growth, with a solid operational foundation,” Theiss remarked at the event.

In Spain, startups such as Exoticca are leveraging this formula to boost their operations and their tech investments. This is just one example of a growing trend: Spanish startups raised €2.3 billion in debt in 2024, surpassing the €1.9 billion in venture capital investment for the same year, according to ‘The Spanish Tech Ecosystem Report 2025’, produced by Dealroom in collaboration with BBVA Spark. 

This evolution reflects a notable change in the financing model for high-growth companies in Spain. Although the ecosystem has doubled in value since 2020, reaching €110 billion, its progression to advanced stages such as Series A remain below the European average. In this context, debt is positioned as an critical bridge, enabling startups to scale projects without relying exclusively on equity.

At the same time, the role of corporate funds (Corporate VC) and entities such as BBVA Spark, which participate in one in five funding rounds, as well as the influx of foreign capital, have reinforced the evolution of this solution by allowing many scaleups to finance their growth and international expansion operations without incurring significant dilution.

From a European perspective, this trend is also gaining traction among entrepreneurs. According to the ‘State of European Tech Report 2024’ by Atomico, the European ecosystem closed out 2024 with some €45 billion in venture capital investment. However, there is still a significant gap in growth stage financing: over the last decade, European scaleups have been underfunded by more than $375 billion compared to their US counterparts.

To bridge this gap, venture debt is emerging as a vital financial tool. While markets such as the United Kingdom, France, and Germany have specialized vehicles and a greater financial culture based on this financing solution, Spain is rapidly gaining ground, fueled by growing adoption and interest from institutional investors.

In Latin America, venture debt is gaining traction in response to an ecosystem that is facing stabilization but continues to be marked by high interest rates and lower liquidity. According to the report prepared by Endeavor and Glisco Partners, “Venture Capital and Growth Equity in LATAM: Overview, Trends, and Outlook for 2025”, venture debt usage has surged despite fewer transactions: while $1.42 billion was raised in 57 deals in 2023, financing obtained through this channel reached $1.63 billion in 40 rounds in 2024.

The same report highlights that the average deal for this financing solution in the region reached $41 million, well above the $7 million average in venture capital rounds. This figure reflects a shift in investor appetite and shows that debt remains the predominant source of capital in specific rounds, particularly in growth and late stages. Notably, a third of the startups that raised capital in 2021 have raised new rounds of financing, with a significant proportion through debt, as the same report by Endeavor and Glisco Partners points out.

Meanwhile, according to the report ‘Trends in Tech 2025’ by the Latin American Venture Capital and Private Equity Association (LAVCA), at least seven Latin American startups raised more than $60 million using this type of financing, up from six in 2023.

The rise of venture debt is not only a response to a more demanding financial environment, but also to an evolution in the way scaleups and investors approach growth. Rather than being simply about raising capital, venture debt is about building sustainable, diversified financial structures that align with the strategic objectives of each stage. Some key elements for accessing this financing formula are:

• Recurring revenue and cash visibility. Venture debt providers look at metrics other than EBITDA, such as recurring revenue, runway, clear KPIs and good cash flow control.
• Financial readiness. Founders must have a skilled CFO who can speak the same financial language and access venture debt.
• Upside for the financier. Since venture debt does not involve direct equity participation, financiers often require mechanisms such as warrants, which allow them to acquire shares in the company in the future at a pre-established price.
• Technology assessment. Using innovations such as generative artificial intelligence, venture debt providers analyze the impact of these trends on the structures of high-growth companies.

The consolidation of this solution in Spain and Latin America marks a paradigm shift in startup financing. Far from replacing traditional venture capital, this option has been integrated as a strategic complement that allows scaleups to extend their runway, optimize their capital structures and maintain control during key phases of expansion.

In a macroeconomic environment that demands efficiency and resilience, high-growth companies that combine innovation with sustainable business models are finding venture debt an effective way to continue growing. In this context, BBVA Spark allows high-growth companies to access the advantages of this financing tool, offering alternative flexible financing solutions that adapt to startup’s real growth cycle and align with new scalability needs.