Deal Terms
Warrant
A security giving the holder the right to purchase shares at a specified price before an expiration date — commonly issued alongside venture debt.
A warrant is a security that gives the holder the right (but not obligation) to purchase a company's shares at a specified price (the exercise price) before a specified expiration date. Warrants are similar to stock options but are typically issued to outside parties rather than employees. In venture capital, warrants are most commonly issued alongside venture debt: lenders accept lower interest rates in exchange for warrants that provide upside if the company is successful. Warrants can be structured as equity warrants (purchase stock) or debt warrants (convert debt to equity). Unlike options, warrants are typically long-dated (5-10 years) and can be transferred. When VCs receive warrants as part of a deal structure, they add to the fully diluted share count and dilute existing shareholders.