Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.As I write to you, SaaS and cloud stocks are busy setting fresh all-time highsand as weve seen, venture interest in modern software companies is pushing more money into the sector.
But despite it appearing to be an incredibly good time to raise equity funding, venture debt and revenue-based financing appear to be having a moment.So why are more folks talking about and raising debt to help power their startups, even when valuations are high and there is a lot of venture capital to be raised?As with all explorations of complex, evolving trends, theres no one answer.
But, some data from a 2019-era survey on venture debt and a conversation I had with equity-free SaaS finance shop Element FinancesJohn Gallagher (Element is a Scaleworks spinout) help explain whats going on.
Lets start with how big the venture debt world is and how fast it is growing and then turn to whats powering its expansion.The data were going to discuss is directional and probably pretty accurate, which is just fine for what we want to do today: detail a general trend of rising venture debt volume over the past few years to confirm what weve presumed to be a trend for some time.Thanks to a report from last year undertaken by Kruze (a startup accounting and HR consultancy), what the firm described as the largest survey of the venture debt market undertaken, including firms that control well over half of the venture debt dollars in the United States, here are estimated totals of domestic venture debt volumes for the past half-decade: