![]() ![]() 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. Ramp didn't respond to a request for comment about potential plans to start its own venture debt business.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. These companies are competing against well-established small business and startup lenders like Silicon Valley Bank and Orix. Other fintech companies with similar offerings include payments processing giant Stripe and Mercury, a San Francisco-based neobank for small businesses, which this month unveiled a venture debt product. To finance its venture debt business, the company has raised a $150 million fund backed by outside inventors and its own capital, according to The Information. The global venture debt market has swelled in recent years, rising from just over 2,000 deals at a value of $12.5 billion in 2013 to more than 5,000 transactions worth over $58 billion last year, according to PitchBook data.Īs venture debt grows in popularity, a variety of investors and companies are seeking to cash in on the hot market.īrex announced last August that it has itself begun offering venture loans to its customers. The company said in an email to PitchBook that it boosted its revenue nearly tenfold in 2021, driven by the growth in interchange fees, which Ramp earns from merchants when customers shop with the credit cards it issues. The new round values Ramp at $8.1 billion, up from the $3.95 billion valuation it reached in September with its Series C, according to PitchBook data. Ramp provides corporate credit cards, paired with free software that helps businesses automate expense management. New York-based Ramp, founded in 2019, competes in a growing market of business lending companies that includes Brex, which is Ramp's main rival, and American Express. Among the startups that have raised nine-figure debt financings are SecFi, which helps startup employees exercise options, and Empower, a mobile banking app provider. ![]() While venture debt is often used as a means for startups to extend their runway and limit founders' dilution, fintech companies-especially those offering credit products-have been raising large debt rounds to finance their business models. Return investor Founders Fund led the $200 million equity investment, joined by prior investors including D1 Capital Partners, Thrive Capital, Redpoint Ventures and Stripe, as well as new investors such as General Catalyst, Avenir Growth Capital, 137 Ventures and Declaration Partners. Last year, Ramp secured a $150 million debt facility, also from Goldman Sachs. The corporate card and spending management startup collected $550 million in debt financing, including a $300 million credit facility from Citibank and a $150 million increase in a credit line from Goldman Sachs. Ramp has raised $750 million in equity and debt in a late-stage funding round, as a growing number of fintech startups use debt to expand their businesses. ![]()
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