#Venture forthe indeed software
Tiger is attempting to fundraise as it loses its star software partner, John Curtius, who was originally supposed to leave the firm in June. Though the target is still formidable, the much-reduced size raises questions about the availability of funds and confidence from LPs across the venture market. As Axios first reported, the firm is aiming to raise $6 billion for its new fund focused on private tech investments-a figure less than half that of its previous fund, and lower than the reported $8 billion the firm was potentially targeting previously, per Bloomberg. Tiger’s whimper: Mighty investment firm Tiger Global’s new fund is looking more like a whimper than a roar in size. There, Allred has a bit of a warning: “If this economic cycle persists, and this lasts…into the second half of next year,” Allred notes, “we will get those data points.”
The question I have here is, with the risks of debt, if the economy stumbles into a recession, will these loans prove a prudent move that will spare startups the need for a downround later, or will they present their own issues if companies struggle to repay the debt down the road if the economic downturn outlasts current expectations? (Vista typically works with enterprise software companies on the more mature side, Flannery says.) “That’s what I’m hearing more than anything,” David Flannery, senior managing director and president of Vista Equity Partners’ credit business, Vista Credit Partners, tells me: that there’s ample uncertainty about when the IPO market will reopen, so companies “want to take cash and fortify their balance sheet.” (Think Arctic Wolf, for example.) In fact, Flannery argues that for companies he’s working with right now, the concern is more capital market uncertainty than economic. Indeed, SVB’s Allred tells me that many of the companies he’s seeing right now raising debt are established companies that raised money in 2021 or early 2022 that “are pretty well financed” and are trying to “bolster their balance sheets as much as possible, just because of the uncertainty of this macroeconomic environment.”Ĭompanies that were ready to IPO are now turning to debt owing to the dried-up pipeline, as The Information detailed in a recent piece. As for the IPO, Schneider says, “especially with this round,” timing is “really in our hands.” Arctic Wolf raised $150 million last year at a $4.3 billion valuation, per PitchBook data. He said a downround “wasn’t really a concern for us” given the company’s position, but that the debt raise was the best option. CEO Nick Schneider wouldn’t comment on the IPO plans but told me “the primary impetus for the raise was really to ensure flexibility,” both on timing for “what might be next” for the company, and for M&A.
Arctic Wolf has been planning an IPO in 2022 but has put a debut on the backburner amid the tricky market. There’s been an increased appetite recently, Allred has noticed, and the loan sizes can be large: As of this week, he says SVB signed term sheets “for, like, $3 million deals and $100 million deals.”Ĭase in point: On Thursday, cybersecurity firm Arctic Wolf announced it secured a whopping $401 million in convertible notes led by existing investor Owl Rock Capital.
#Venture forthe indeed full
Venture debt deals have topped 1,900 totaling $22.4 billion through the end of September, per PitchBook data (last year, it hit $32.7 billion for the full year). VC firms are also keen on avoiding locking in a dreaded downround, as they’ll have to mark to market their companies and take a hit on their quarterly LP reports: On both sides of the equation, Allred notes, “no one to touch that.” “None of that’s attractive,” he notes, so debt, which comes with its own structures to consider, but is much less dilutive to valuable startup shares, is looking like a good source of capital, Allred suggests. And second, “if you are going to go tap equity capital right now, it’s going to be expensive: It’s either going to be a downround,” or a “valuation multiple that you would not have gotten a few quarters ago” or “something structured with a lot of terms and preferences.” Recently, some lenders suggest startups are flocking to debt for two big reasons: One is “the equity capital markets have just slowed down, there are fewer deals happening,” Dan Allred, a senior market manager who heads up national fintech and payments strategy teams at Silicon Valley Bank, a big lender in the venture space, tells me. It’s no surprise that when times get tough and valuations plunge-while VC firms become more stingy with their coffers, as they have this year-startups seeking a cash influx will look to loans.
0 kommentar(er)
