[pdeuchler]

> It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics.

This is, of course, exactly my point. "High yield venture debt" only exists due to absurdly low interest rates and an abundance of capital being driven out of public markets and into private ones. Now that the free lunch is over do not be surprised that your lenders come calling now that your "high yield" (read: risky) loan is no longer profitable under current market conditions.

> In a highly competitive market, if you don’t lever up, your competitors will eat your market.

I.E. When capital is cheap and abundant it is possible to burn cash on an unsustainable business plan for marketshare, but when the entire market itself rapidly shrinks your business plan is horribly unviable.

[mam2]

Honestly most companies, not startups only, run on the idea that if you don't have debt, you're doing something wrong. It's not entirely false when the economy is neutral at least.

[ttul]

Ultimately, the explosion in venture debt products was probably an off shoot of quantitative easing and the general long term fall in interest rates. Investors seeking a yield from regular lending have not been getting it. The present financial crisis will test the hypothesis that the yield on all this venture debt was adequate to cover the risk of default.