Startups secured $6.34B from 931 venture debt deals in H1 2023, down 68.41% from the $20.07B raised across 1,513 deals from the same period last year. The decline is largely due to the absence of prominent venture debt lender Silicon Valley Bank, which imploded earlier this year. The number of venture debt deals for seed-stage and early-stage startups declined 44% YoY and 45% YoY respectively in H1 2023, per Pitchbook. - Venture debt deal values declined by 27% YoY for late-stage startups and by 39% YoY for growth-stage startups.
- Startups have found it difficult to raise venture debt amidst the challenging fundraising environment.
- This has caused the deal terms to shift in favor of lenders, who are able to demand more favorable covenants, warrant coverage, and higher interest rates.
- Additionally, lenders are being selective of the type of startups to back, typically extending credit to startups that are likely to raise subsequent funding from investors and have a path toward profitability.
- Pitchbook analyst Kaidi Gao said, "Since SVB's collapse, lenders have reported that they have not seen other banks stepping up to replace that specific function that made SVB so unique."
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