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A unique moment for venture debt investing in Asia

As traditional VC funding pulls back, venture debt becomes more attractive

    • Unlike conventional bank loans, venture loans are extended even in the absence of two “C”s that banks want to see but startups tend to lack: sufficient collateral and cashflow. Instead, venture loans are made on the basis of growth potential.
    • Unlike conventional bank loans, venture loans are extended even in the absence of two “C”s that banks want to see but startups tend to lack: sufficient collateral and cashflow. Instead, venture loans are made on the basis of growth potential. PHOTO: PIXABAY

    Oi-Yee Choo

    Published Sat, Oct 15, 2022 · 05:50 AM

    MANY investors know venture capital (VC) well. Fewer are familiar with its unassuming cousin, venture debt.

    The name itself feels like an oxymoron. “Venture” suggests an endeavour that’s daring and risk-on, while “debt” implies an instrument that’s less exciting and lacking in upside. The two make for strange bedfellows.

    Yet as an asset class, humble venture debt has been growing steadily. Between 2015 and 2021, venture debt activity in the United States rose from US$17 billion to US$30 billion. Outside the US, venture debt remains under-profiled, but that may soon change.

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