8/24/2023 0 Comments Svb venture debtSilicon Valley Bridge Bank contacted him to say it was interested in a deal and he wouldn’t need to park all of Vizion’s cash there, relaxing an onerous SVB requirement, Mr. Aiming to secure up to $4 million in a line of credit, he began talks with a handful of lenders including Brex Inc. Kyle Henderson, co-founder and CEO of supply-chain tech startup Vizion Inc., said he was closing a venture-debt deal with SVB as the bank collapsed. Some startup founders say alternatives to SVB are manageable. SVB’s collapse tipped the scale in favor of venture-debt providers, said David Spreng, founder and CEO of venture-debt firm Runway Growth Capital, adding that, “The bar is that much higher for the companies we want to partner with." ![]() “We are not a lender of last resort," Mr. TriplePoint, which is seeing more demand since SVB collapsed, is also looking to reduce risk by issuing smaller loans, adding stronger protections such as milestones in loan terms, and rejecting some borrowers, he said. TriplePoint charges more in interest and warrant coverage, Mr. SVB could lend to earlier-stage borrowers at cheaper rates because it had a lower cost of capital in the form of bank deposits, and it generated higher revenue per borrower with banking products. “We don’t have deposits to subsidize those cheap loans." “SVB was dirt cheap," said Sajal Srivastava, co-chief executive and co-founder of TriplePoint Capital, a nonbank lender that competed with SVB for venture-debt clients. Nonbank lenders also aren’t likely to offer startups deals as flexible as ones from SVB. “They certainly don’t know how to underwrite lines of credit for these companies." “They have no service layer to support seed and early Series A companies that are doing under $5 million in revenue," he said. Oceans Ventures is working with more than 40 startup founders looking for new debt facilities outside of Silicon Valley Bridge Bank, said Steven Rosenblatt, co-founder and general partner at the venture-investing firm.īig banks are out of touch with the unique needs of venture-backed startups, Mr. Many venture-capital firms have also stepped in to help portfolio companies find new lenders. in 2021, venture-debt deals totaled $31.2 billion, compared with $13.1 billion five years earlier, according to a PitchBook Data Inc. Venture-backed companies loaded up on debt in recent years amid lower rates. Borrowers interested in refinancing SVB loans or looking for new loans face a different market, she said. “A lot of these companies entered into these facilities when interest rates were lower and the markets were better," said Raquel Smith, counsel in the debt finance practice of law firm Lowenstein Sandler LLP. Just 3.8% of startup founders who responded to a mid-March survey by venture firm NFX said they would bank with SVB. But many borrowers, and startups that didn’t take out loans, are looking for other options. Banking sector turmoil will likely result in a tightening of credit for borrowers, Federal Reserve Chairman Jerome Powell said Wednesday.įederal regulators who set up Silicon Valley Bridge Bank to manage SVB’s assets are searching for bidders to acquire them, and the bridge bank’s CEO has urged clients to stay. But lenders often aren’t ready to serve early-stage companies the way SVB did, and when they do, their loans are likely to be smaller, more expensive and have more stringent terms.Ĭonditions in debt markets were already growing worse for startups before SVB’s collapse, with rising interest rates and increasing risks in the tech market. Many lenders say they are seeing more demand from borrowers since regulators took over SVB. ![]() SVB provided debt capital on reasonable terms to private technology companies, and had $74 billion in loans to startups, investment firms and other clients as of December. Sanders said, referring to a loan in which a venture-backed company’s assessed value serves as collateral. “It’s just obvious they have zero appetite for talking about venture debt," Mr. The Salt Lake City startup began looking for alternatives for its multimillion-dollar venture-debt facility with SVB when the bank collapsed earlier this month, turning first to big banks, he said. Artificial-intelligence startup Artifact has hit a wall trying to secure credit from several large banks, said co-founder and Chief Executive Nate Sanders.
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