Tough financial conditions belie a ripe venture debt market

TOUGH market conditions are creating a spike in demand for venture debt among startups. A tighter funding environment along with unfavourable exit conditions in public markets have led to more venture debt requests, even more so than at the onset of the pandemic in 2020.

Venture debt provider Genesis Alternative Ventures has been tracking quarter-on-quarter growth in venture debt requests, and is seeing an average of between US$80 million and US$100 million of requests per quarter currently. Innoven Capital, a venture lending platform, is seeing more companies build venture debt into their capital raising rounds.

“It comes down to the question of price, that’s important because the prices and valuations would affect a founder’s dilution. Naturally venture debt has become an even more attractive option in the current market environment because we are less dilutive and we don’t have to set the valuation,” said Paul Ong, partner, Innoven Capital.