Venture Debt

With this relatively new product for companies originating from Emerging Europe and Israel we aim to complement venture capital financing to foster further growth.

Strategy

  • 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.

Investment criteria

  • 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

Read more about the benefits of Venture Debt in the articles by: Sifted, The Recursive, PFR

Find us also on Palico – the leading online marketplace for the private equity fund community, matching LPs with GPs and buyers with sellers on our secondary market.

Click to find out more- Frequently Asked Questions

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