With this relatively new product for companies originating from Emerging Europe and Israel we aim to complement venture capital financing to foster further growth.
- Focus on Series B+ stage companies, however could consider slightly earlier stage.
- The sweet spot is business-to-business software-as-a-service solutions, however, we also finance compelling business-to-consumer applications.
- We can finance software, software enabled and hardware companies
- Loan facility amount of EUR2-5m, which may be increased further. through a syndicate with reputable international venture debt lenders that we can bring.
- Flexible on Board observer roles, advisable to enable our value-add.
- Sector and business model agnostic.
- A strong founding team supported by reputable venture capital investors
- Competitive position in a large market
- Strong revenue traction of EUR300k+ MRR and growing
- Solid business model with proven economics
- Either in the process of a financing round or recently raised a round
Venture Debt Product Structure
Venture Debt consists of two components: the Loan and the Warrant.
- The Loan:
- A three year term loan repaid on a monthly basis.
- Monthly payments include interest payment and amortisation of principal (similar to a mortgage).
- Loan structure can be adjusted through tranching and early repayment options.
- The interest rate of the loan varies based on the individual company.
- The Warrant:
- An option for the lender to buy shares in the company at the time of a liquidity event at a predetermined price. Usually expressed as a percentage of the Loan notional amount.
- Allows the lender to align interests with the company – to grow and provide additional compensation for taking on higher risks than traditional lenders are prepared to take.
- Warrants strike price is set at underwriting and is usually linked to the most recent priced round in the shares of the company.
Venture debt use cases
- Increase efficiency of equity financing through decreasing dilution to founders and other existing shareholders
- “Insurance Policy” to secure sufficient runway until the next milestone
- Alternative to a convertible loan
- Bridge to profitability
- Bridge to an exit
In this Sifted article we explain the benefits of venture debt in greater detail.
For more insights on Venture Debt, listen to a podcast with Denis Mosolov, Managing Partner at Flashpoint