With the events of the last couple of days, we would like to share our thoughts and observations as venture investors and borrowers navigate the current venture debt market volatility. We remain the most active and trusted debt advisor to private venture-backed technology and healthcare companies having closed over $1.5 billion in debt capital commitments for clients in the last six months, and with ~$1.8 billion of debt raises currently in market.
Observations:
- While there exists a considerable amount of uncertainty relating to venture bank financing, there exists strong receptivity in the non-bank lender market for venture debt financing.
- We have spoken directly with over 50 lenders in since Thursday, March 9th who have confirmed they are leaning in and have high levels of dry powder to deploy. Virtually all these lenders recognize the current market volatility has little to do with the quality of banks’ current venture loan books, but more with their liquidity positions.
- Other market factors remain in effect influencing debt structures: the bank syndication market remains unstable and other high-yielding liquid opportunities are providing an abundance of opportunities for private credit players to deploy money at lower risk profile opportunities while still attaining their (higher) target returns.
- A noteworthy new development includes non-bank lenders promoting solutions to address deposit claim risk.
- Cash runway still remains paramount for venture lenders to engage: runway under 12 months is a non-starter without additional equity closing in parallel with the debt; 18 months is preferred; 24+ months commands myriad debt opportunities.