Venture debt12/16/2023 ![]() However, we continue to use “venture debt” as an umbrella term for a broad range of non-dilutive and minimally-dilutive funding since it’s more commonly recognized.ĭebt Financing Alternatives for Startups and Other Fast-Growing Businesses As a result, some industry participants and observers have begun to use the term “growth debt” instead of “venture debt.”Īt Find Venture Debt, we agree that “growth debt” has become a more appropriate term as the market has evolved. This expansion has been so broad that the term “venture debt” and its common definitions are much too narrow. Venture debt caught their attention, which has led to a tremendous increase in the number of lenders and types of loans in the market. The Proliferation of Lendersĭuring the low-interest rate environment since the Great Recession of 2007-2009, institutional investors have been aggressively seeking out higher yield lending opportunities. ![]() The loans were structured to complement the equity provided by the venture capital firms, and were essentially secured by the enterprise value of the startup and the expectation that the venture capital investors would continue to fund the startup in subsequent equity rounds. However, they focused on providing loans to startups backed by well-known venture capital firms. Generally, they did not require physical assets nor cash flow. In the early 1980’s, lenders such as Silicon Valley Bank (SVB) created a new type of venture debt financing. The term “venture debt” or “venture lending” was originally used in the 1970’s to refer to equipment financing (venture loans and venture leasing) provided to early-stage companies. These startups needed to acquire physical assets, such as computer hardware or life sciences laboratory equipment, but lacked the cash flow for traditional debt financing. There are narrow and broad definitions of venture debt.
0 Comments
Leave a Reply.AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |