Runway Growth Capital, a provider of growth loans to both venture and non-venture-backed companies seeking an alternative to raising equity, revealed the findings from its third venture debt review study. Produced in partnership with Sage Outcomes, the survey gauged the current market perceptions of venture debt financing and explored how the collapse of Silicon Valley Bank in March 2023 has shaped the views of both capital seekers and capital providers.
Key findings from the survey include the following:
- 88% of venture capital respondents reported their portfolio companies plan to pursue venture debt in the next 12-18 months.
- A third (33%) of entrepreneurs stated that, in their opinion, venture banks have become less trustworthy since the collapse of SVB.
- 23% of VCs feel that venture banks have become less trustworthy following the collapse of SVB.
- 67% of entrepreneurs stated that they were willing to raise venture debt with a non-bank or specialty finance lender.
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According to Runway Growth Capital, though misperceptions about venture debt persist (as they have historically), the collapse of Silicon Valley Bank seemingly did not affect demand for venture debt or its outlook in the months ahead. However, the company noted that lender reputation has become increasingly important and that participants indicated a heightened interest in non-bank specialty lenders.
“Despite facing unprecedented disruptions like the collapse of Silicon Valley Bank — a shockwave that many thought might dampen enthusiasm for our industry — the demand for venture debt remains strong,” David Spreng, founder, chairman and CEO of Runway Growth Capital said. “More so, it’s evident that, in the current climate, lender reputation holds significant weight. As non-bank specialty lenders rise in prominence, we are reminded that educating our community about the nuances of venture debt is paramount.
“Venture debt comes in many forms. Early-stage venture debt is very different from late-stage growth lending. Early-stage is much more dependent on the financial backing of the company and its equity partners’ willingness to continue providing funding. Late-stage, however, looks more closely at the company’s fundamentals, including its financials and path to profitability. Success in venture debt also depends closely on the types of businesses using it, the industries they are in, as well as their ability to repay the loan.”
To gather results for its venture debt report, Runway Growth Capital conducted an online survey with Sage Outcomes between April 10 and June 6, 2023. The survey was conducted among entrepreneurs seed series and beyond (within the technology, life sciences and consumer sectors) and venture providers. Respondents were recruited from PitchBook and Runway Growth Capital’s online network. A total of 118 complete responses were collected from the entrepreneur and venture capitalist audiences. Following the survey, five subject matter experts within the Runway Growth Capital network were invited to participate in an online interview to provide a more qualitative perspective to the findings.
