Venture debt is a type of loan designed specifically for early-stage, high-growth companies with venture capital backing
Locally and globally, startups continue to face difficulty in accessing the range of non-dilutive financing mechanisms available for traditional businesses. As 2021 comes to an end, many are looking towards a new possible venue for funding.
“In the GCC, venture debt has started to emerge as a funding alternative and complementary source of capital for these high-growth technology enabled companies which used to rely on equity only as a source to fund their businesses.” States Natasha Hannoun Head of Debt at SHUAA Capital businesses in a special report 2021 MENA Venture Debt Sentiment Report by MAGNiTT.
Venture debt is a type of loan designed specifically for early-stage, high-growth companies with venture capital backing.
In terms of favoring certain types of funding opportunities, 72% of respondents preferred to raise an investment round that was part equity/part debt with 13% of startups considering raising a debt only investment round.
According to the report, which surveyed more than 100 startups and investors, 94% of respondents were aware of Venture Debt, however less than half (49%) claimed to have a strong understanding of the tool.
“The awareness around venture debt was found to be high amongst key stakeholders of the venture capital ecosystem. Only 6% of respondents were not familiar with the funding instrument,” the report pointed out.
A deeper look noted that a majority of investors (74%) had a “strong” understanding of venture debt compared to 58% of startups who had a “rough idea,” with only 35% of startups claiming to have a “strong” understanding of the financing instrument.
The report was prepared by MAGNiTT and sponsored by asset management and investment banking platform SHUAA Capital. Answers were collected from 110 responses; 40 investors and 70 startups.
