Venture Debt Terms - Mid 2023

While Barbie vs Oppenheimer debates rage this week, we wanted to offer more interesting discussion fodder – venture debt terms.

With the dramatic decline in equity flows, higher rates, and bank failures to boot, both venture debt supply and demand have contracted significantly – volume is down 65% vs last year.

That said, we believe the market has largely stabilized in the wake of recent bank failures.

Incumbent and newly formed venture banking groups (including the new owners of SVB and Signature), as well as non-bank funds, are addressing venture lending requests (in some cases quite competitively) assuming they are down the fairway.

Additionally, portfolio credit quality seems to be holding up thus far. To be sure, portfolio managers and workout groups are busy, but there has been little evidence of upticks in expected charge-offs as published by BDCs.

Lending standards remain tight, but a gradual loosening is possible in the medium term if economic recession fears abate and equity flows rebound.

Here is where we stand: