Venture Debt Hits Record $68.8 Billion in 2026

Venture-backed startups borrowed a record $68.8 billionin 2025, according to a joint report released in May by Runway Growth Capital andPitchBook, firms that track startup funding.Alexander Kopylkov, a venture investor whose portfolio includes Telegram, Anthropic, Canva,Replit, and others, is publishing guidance this week on what the record means, timed to the release of the new numbers.

Think of it like buying a house. Oneoptionis to bring in a partner who puts up cash and owns half the house with you.The other is a mortgage: you keep the whole house and pay it back over time with interest.Most startups have chosen the first option, selling a slice of the company for cash. That is equity. Now more of them are choosing the second: borrowing money and paying it back without giving up ownership.That is venture debt, and 2025 was its biggest year on record.

The total number of loans stayed close to 1,000 in 2025, but the loans got much bigger. Among the largest, most established startups, the typical loan size hit a ten-year high in early 2026, reaching $10.8 million, with the average climbing to $68.2 million. These bigger, revenue-generating companies alone borrowed 67 percent of all the money lent to startups in that period, or $13.3 billion in a single quarter.

According to Kopylkov, founders are not being forced into these loans.They are choosing them because they believe their companies are worth more than investors are currentlyoffering fora stake. Borrowing to bridge that gap costs less than selling shares today at apricethe founder thinks is too low.

It can be brokendownsimply: every time astartupsells shares to raise money, its founders own a little less of what they built.By the second or third funding round, investors as a group typically own more of the company than the founders do.A loan worksdifferently. Once it is repaid, with interest, the founder still owns everything, which is why it is mostly companies with steady revenue choosing debt: they are the ones confident they can repay it.

Citing the new report, Kopylkov notes that AI and subscription software companies account for most of the activity, with subscription software alone drawing more than $28 billionin loans for a second straight year.The cost of building AI infrastructure has pushed the trend further. A Texas data center project run by Crusoe, backed by investmentfirmsBlue Owl Capital andPrimary Digital Infrastructure in a$15 billionpartnership, took out a$7.1 billionconstruction loanled by JPMorgan for its latest phase alone. The AI companyxAIborrowed$5 billionas part of a broader$10 billionraise to build its own data centers. Neither company had to sell more of itself to keep building.

For founders, Kopylkov recommends treating loans andsharesales as tools for different jobs. A loan suits predictable costs with a clear payoff, like buying equipment oracquiringcustomers at a known price. Selling shares still makes more sense for the riskier, less certain parts of a business, where a fixed monthly repayment would be the wrong fit.

From an investor's perspective,it can be judgedhow risky a startup's debt is with one simple question: doesrepayingit depend on the business performingroughly asexpected, or on everything going right? A typical loan covers 25 to 35 percent of what a startup raised in its last funding round, at interest rates between 8 and 15 percent a year. That is easy tomanage fora company with steady revenue. It is a real danger for one that does not have it yet.

To wrap up, startup borrowingmightkeep growing through 2027, but the gap between carefully priced loans and risky ones will widen. Founders who use debt to paper over a business that cannot yet fund itself, rather than to speed up one that already can, will be the first to run into trouble.The $68.8 billionrecord shows how selective founders and lenders have both become about where the money goes.

The content has been authored in collaboration with our guest contributor, Leah.