Why Venture Debt?
Venture debt is a form of financing suited for VC-backed high-growth startups that have high working capital requirements but lack tangible assets or sufficient cash flows to access traditional bank lending. It is fundamentally a founder-friendly and comparatively cheaper financing option, as it helps the founders avoid excessive dilution of their equity at early stages of their company’s growth. By enhancing liquidity, venture debt can also help companies navigate unforeseen market volatility or bridge short-term capital traps.
In India and South East Asia, two of the most vibrant startup ecosystems in the world, venture debt is still at an early stage and has yet to catchup with US where venture debt has been around for over 50 years. Several notable companies such as Facebook, Uber, Airbnb have also taken venture debt at some point in their growth journey. With the VC investment activity in these regions now gaining pace, the time is ripe for venture debt to pick up. Over the next 3-5 years, the region presents a compelling growth story with a US$6 - 7 billion annual deployment opportunity in venture debt. As such the market has the potential to scale up by 4-5x over the next few years.
Coupled with our other funds and expertise in private markets, such as LC Nueva (Venture Capital) and LC Supply Chain (Private Credit), our international investments teams are committed to partnering with promising early-stage businesses and supporting their growth over the years.