The Professor will present the paper: Venture debt as bridge financing

We show that venture debt often acts as bridge financing to an equity round or acquisition. We argue that venture lenders have distinct skill sets from traditional venture capitalists (VCs) that make them the natural investors while the company awaits the resolution of important strategic uncertainty. Using novel contract-level data from BDC venture lenders, we establish that venture loans are frequently prepaid long before maturity, and that prepayment rates spike with new financing rounds or acquisitions. When financing rounds or acquisitions are induced by uncertainty resolution, as measured by the grant of a patent or the end of a clinical trial, they essentially always pay off the existing venture loan. Our explanation is consistent with narratives that venture debt ''avoids dilution'' and ''extends the runway'' between equity rounds.