{"id":8494,"date":"2023-08-05T21:17:25","date_gmt":"2023-08-05T21:17:25","guid":{"rendered":"https:\/\/isafespend.com\/personal-finance\/new-firms-seizing-opportunities-in-a-post-svb-era\/"},"modified":"2023-08-05T21:17:26","modified_gmt":"2023-08-05T21:17:26","slug":"new-firms-seizing-opportunities-in-a-post-svb-era","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=8494","title":{"rendered":"New Firms Seizing Opportunities In A Post-SVB Era"},"content":{"rendered":"
\n

The collapse of Silicon Valley Bank (SVB
\n VB
\n <\/fbs-ticker>) had a profound impact on the venture debt market. Venture debt has been a complementary source of non-dilutive capital alongside traditional venture capital (VC) for more than two decades.<\/p>\n

Even though SVB\u2019s collapse only happened recently\u2014in spring of 2023\u2014the effects are already being documented. According to Pitchbook\u2019s Q2 2023 PitchBook-NVCA Venture Monitor, early stage lending in the first six months of 2023 fell 44% year over year. This was SVB\u2019s core market. It remains to be seen if First Citizens Bank\u2014the new owners of SVB\u2014will continue its lending to early stage startups based on the VC relationships and a multi-product approach.<\/p>\n

According to a Pitchbook analyst note from the spring Venture Debt Conference, \u201cSilicon Valley Bank\u2019s collapse has blown open a huge opportunity to take up more market share of venture debt.\u201d<\/p>\n

<\/fbs-ad><\/p>\n

Recently, much has been written about rising inflation, technology capital market retrenchment, and private debt firms tightening lending practices. Having a major source of venture debt no longer available to young businesses and startups just increases funding difficulties. So will this resource continue to be scarce, or are other options already establishing themselves?<\/p>\n

Who Is Stepping In To Fill The Void?<\/h2>\n

While there hasn\u2019t yet been an exact replica of SVB arise, other options for venture debt have experienced growth. It seems that established incumbent venture debt players such as Western Technology Investment, Triplepoint Capital, and Trinity Capital have already benefited from the current market.<\/p>\n

According to Maurice Wedergar, CEO of WTI, \u201cIt\u2019s hard to imagine there could ever be another SVB. They had a unique position in the market with their ability to offer inexpensive debt coupled with a broad portfolio of banking products.\u201d<\/p>\n

Wedergar continues, \u201cIt seems unlikely that regulated banks will be allowed to be as aggressive in the future. We have seen a surge in deal flow since March.\u201d<\/p>\n

Alongside established players, a fresh wave of private debt firms are entering and taking hold of the market. These firms are disrupting existing generalist venture debt strategies.<\/p>\n

As the venture capital industry expanded, it gave rise to new VC firms with specialized niche strategies and industry-focused expertise. In a similar vein, the venture debt market looks to be following a similar pattern.<\/p>\n

Strategies For The Private Debt Market<\/h2>\n

Wheelhouse Partners is an innovative new player in the private debt market. Unlike traditional funds, Wheelhouse primarily focuses on companies that have digital channels for online growth. This can include either direct-to-business or direct-to-consumer. Wheelhouse\u2019s strategy leverages digital marketing expertise and its operating capability to add value to its portfolio. They term it \u201cModern Venture Debt.\u201d<\/p>\n

Wheelhouse Partners founder John Occhipinti says, \u201cWe combine more than 40 years lending experience with some of the most talented digital marketing teams in the world. We not only provide capital, but also offer domain and operating expertise to help entrepreneurs grow their businesses.\u201d<\/p>\n

Unlike venture capital, venture debt firms cannot afford as many write-offs. Multiple loan write-offs can more acutely impair a debt fund\u2019s overall returns. This is why early-stage lending requires successful underwriting of risk.<\/p>\n

\u201cOur approach gives us an information advantage for underwriting,\u201d says Matt Maloney, a 30-year ex-SVB lending veteran and advisor to Wheelhouse. \u201cUnlike generalist firms, we spend as much time with our analyses diving into the companies\u2019 digital dashboards as we do reviewing financial statements.\u201d<\/p>\n

Another example is Brex, which entered the venture debt market with additional offerings not restricted to non-dilutive capital. Brex offers software and services expense management, travel, credit card, bill pay and financial modeling. Their tools also give them insight into cash flow and underwriting risk.<\/p>\n

Lending Of The Future<\/h2>\n

The era of relationship lending solely reliant on VC contacts could be a thing of the past. Those poised for success will be those who can offer value to entrepreneurs that extends far beyond monetary support in addition to a deeper comprehension of underwriting risk.<\/p>\n

The market is also continuing an important cycle. Businesses that took out loans in 2020 had more plentiful access to VC funding alongside their debt, making repayment easier. With capital markets constricting and fewer lenders in the early stage, many entrepreneurs will be struggling to find continuing funding for loan repayment.<\/p>\n

So what does the future hold? Smart new innovative lenders originating loans from the second half of 2023 will likely be top quartile vintage for limited partner investors<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The collapse of Silicon Valley Bank (SVB VB ) had a profound impact on the venture debt market. Venture debt has been a complementary source of non-dilutive capital alongside traditional venture capital (VC) for more than two decades. Even though SVB\u2019s collapse only happened recently\u2014in spring of 2023\u2014the effects are already being documented. According to<\/p>\n","protected":false},"author":1,"featured_media":8495,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44],"tags":[],"class_list":{"0":"post-8494","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance"},"yoast_head":"\nNew Firms Seizing Opportunities In A Post-SVB Era | iSafeSpend<\/title>\n<meta name=\"description\" content=\"The collapse of Silicon Valley Bank (SVB VB ) had a profound impact on the venture debt market. 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