7/28/2023 0 Comments Mercury venture debtWith the current state of the market, he expects that lending pace to continue. Despite being in the market for less than a year, Wu said Brex’s venture debt product is nearing the $800 million mark in terms of lending to a broad array of companies from SaaS to e-commerce. “But more broadly, this is something that has been around for decades … it’s a product people are better understanding.” A fit for this marketīrex currently lends anywhere between a couple of millions of dollars and $15 million, and rates can range-depending on the company-from 4 percent to around 10 percent. “Obviously, the last couple of months has evolved the conversation around venture debt,” said Benjamin Wu, CEO of Brex Asset Management, which launched the company’s venture debt product last August. And while venture debt-if raised in conjunction with equity-may not prevent a “down round” in this environment, it can lessen the amount of more expensive venture capital needed and also lower dilution. However, all debt has the similarity of giving companies cash they may need while not diluting the stakes of founders and shareholders. That type of debt can be secured by assets and loans those companies generate-something a typical SaaS company may lack. Now, with the rise of fintech companies, different kinds of asset-backed debt like “warehouse financing” have become popular. The debt-often less structured and with less financial covenants than other forms of debt-is used for traditional growth purposes and is often lent based on the startup’s investors and/or where the company is in its growth. Traditionally, venture debt has referred to debt a VC-backed company raised-usually in unison with raising equity-to both elongate its runway and cut down on dilution. Venture debt can be defined differently even by those in the industry. ![]() “The equity markets are choppy.” What is it? “Are the conversations changing? Yes, over the last month or so,” said Dan Allred, senior market manager at Silicon Valley Bank. That type of decrease may explain why those in debt say things are getting busy. Investors have told Crunchbase valuations are off about 20 percent or more for many startups from late last year. Those headlines are against a backdrop of what many see as a slowdown in startup funding as geopolitical issues, public market tumult and a lingering pandemic has brought uncertainty to the market. Earlier this month, banking service provider Mercury announced it will launch its own venture debt offering-looking to lend more than $200 million this year and up to $1 billion over the next two years-following other fintech brethren like Brex into the debt offering realm. Past performance is not indicative of future results.It’s much too soon to proclaim the demise of venture capital raises as the market seems to be in the midst of an adjustment, but debt financing seems to be popping up in the news more.Įarlier this week, corporate card and expense automation startup Ramp announced a $750 million raise at $8.1 billion-$550 million of which was debt financing backed by Citi and Goldman Sachs. Nothing contained in this article may be relied upon as a guarantee or assurance as to the future success of any particular company. Due to various risks and uncertainties, actual events, results or the actual experience may differ materially from those reflected or contemplated in these statements. ![]() ![]() No assumptions should be made that investments listed above were or will be profitable. Companies mentioned in this article may be a representative sample of portfolio companies in which Contrary has invested in which the author believes such companies fit the objective criteria stated in commentary, which do not reflect all investments made by Contrary. Information provided reflects Contrary’s views as of a time, whereby such views are subject to change at any point and Contrary shall not be obligated to provide notice of any change. Disclaimer: Nothing presented within this article is intended to constitute investment advice, and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Contrary LLC (“Contrary”).
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