Category: debt
February 18, 2025 Pitchbook : Venture debt hits all-time high as startups diverge from VC expectations
Later-stage startups are increasingly turning to venture debt as they struggle to keep up with growth expectations from VCs, and as a way to avoid raising equity financing at lower valuations. (read more…)
March 6, 2024 Claret Capital : What is the real cost of capital in Venture Debt?
To put it simply, the return Alternative Lenders need to make to justify their access to capital has increased, and therefore so has the cost for the borrower. However, venture debt providers have maintained the same cost of capital throughout, despite the increase in interest rates. (read more…)
CATEGORY: alternative financing, capital, debt
January 17, 2024 Sifted : M&A activity is likely to skyrocket in 2024 — how is financing changing?
“[Venture debt works for companies] looking at M&A as an option for bolting on additional solutions or expanding into new markets where there’s a certain level of predictability around payback periods [...] having debt to just sit on the balance sheet doesn’t always make sense. Debt can be useful when there are key drivers, identifiable roadblocks or cash requirements that you need in the future.
(read more…)August 14, 2023 Pitchbook : Q2 2023 Public BDC Venture Lender Earnings
At the end of Q2, the 5 BDCs had $1.335BN in available liquidity via cash and credit facilities, a tick up of ~$175M from Q1. Hercules represents 50% of this dry powder, roughly the same share as at the end of Q1. The median investment yield of the 5 venture debt BDCs has increased from 12.4% in Q1 2022 to 16.2% in Q2 2023, an increase of 380 basis point (“bps”), or 3.8%. That’s an ~31% uptick in yield achievement in the span of 6 quarters. The bulk of this increase (290 basis points) occurred in 2022 with a further increase of 90 basis points in 1H 2023. (read more…)
CATEGORY: capital, debt, resilience
November 16, 2021 Oaktree Capital : Global Opportunity Knocks: The Evolution of Distressed Investing
The evolution of this investment style has been a gradual process. In the late 1980s, investors like Oaktree’s principals, who focused on distressed assets, were primarily targeting U.S. high yield bonds. The opportunity set eventually expanded to include bank debt, mortgages and opportunities in growing non-U.S. markets. In the 1990s, distressed opportunities investors increasingly began exploring situations that were complex but not classically distressed, especially those in illiquid markets or niche industries in which companies’ access to capital was limited.
In the decade following the GFC of 2008-09, investors began finding opportunities in an ever wider array of areas, such as direct lending, portfolios of non-performing bank loans, real-estate-related debt, specialty-finance platforms and structured credit, among others. Experienced investors found that private credit and other complex opportunities could – like traditional distressed debt – provide the combination of significant upside potential and strong downside protection.
(read more…)CATEGORY: debt, downturn, leadership
April 24, 2020 Nathan Laka : Venture Debt: 50+ Options for Anti-VC SaaS Founders
There are only 2 ways to raise capital for your software company to drive growth. You can raise debt, or you can raise equity. Over the past 10 years, investors (equity) and lenders (debt) have standardized different mixes of the two to give more freedom to entrepreneurs (read more…)
CATEGORY: alternative financing, debt
March 13, 2020 TIMIA Capital : Tired Investors? Revenue Finance Can Help.
Investors can often hinder the forward traction of your company. Sometimes they put unrealistic growth expectations on the team and apply pressure to take on more equity funding. Other times, they prevent you from raising much-needed growth capital because they don’t like the valuation (yet they’re reluctant to cough up more money themselves). (read more…)
CATEGORY: alternative financing, capital, debt
March 2, 2020 Bigfoot Capital : The Pros and Cons of Series A Funding vs. Revenue-Based Financing
Although attaining funds to advance your startup can be pivotal to its success, you can bet that securing financing will take more time than a simple trip to the bank. There are lots of non-traditional financing options available and not all terms are the same. Understanding which type of financing will best meet your startup’s capital needs before pursuing of any one source of funds is crucial. (read more…)
CATEGORY: alternative financing, capital, debt
February 7, 2020 Alex Danco : Debt is Coming
The Financial Capital all-equity stack, as powerful as it is for creating something out of nothing, is and has always been at odds with the Production Capital mentality of a business builder and operator. There is nothing inherent to tech companies that requires that so many of them fail to live up to their aspirational valuations, aside from the way they’re funded. (read more…)
CATEGORY: alternative financing, debt, risk, valuation
January 21, 2020 TIMIA Capital : As Over-Funded Unicorns Lose Their Shine, Is Bootstrapping Finally Becoming Newsworthy?
The phenomenon of celebrating funding rounds is baffling. And it sets a poor example for new founders. We need to take the focus off the funding and place it back on enterprise value creation, revenue growth, and capital efficiency. I’m not saying that you should never take venture capital. It’s just that there’s a time and a place for it and, for the most part, early-stage founders are hugely disadvantaged by it. For early-stage founders, it’s in the best interest of the venture capitalist if you rapidly fail. Compounding returns make time your enemy—when you fail to meet the unrealistic growth targets, the VC will cash out and move on to the next shiny object. In this scenario, the founder is left with nothing and all the enterprise value creation (or potential for value creation) is destroyed. (read more…)
CATEGORY: alternative financing, capital, debt, profitability