Cloud 9fin Nothing venture-d, nothing gained
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May 8, 2025 Ron Daniel, co-founder and CEO of Liquidity Group, highlights the intricacies of venture debt and tech lending. He delves into how these differ from traditional private credit, particularly in supporting companies with negative EBITDA. The conversation also navigates the complexities of loan agreements, stressing the need for clear covenants and effective risk indicators. Daniel discusses the impact of economic cycles on lending strategies and predicts a promising future for tech lending driven by innovation.
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What Is Venture Debt?
- Venture debt finances negative EBITDA companies in growth stages with non-dilutive loans backed by strong equity investors.
- Unlike regular private credit, venture debt relies on investor backing, not physical assets, for loan security.
Focus on Key Covenants
- Focus on identifying 2-3 critical covenants that predict loan risk rather than many irrelevant ones.
- Monitor key financial parameters like runway or cash flow in real time to detect risks early.
Tech Lending Requires Real-Time Risk Monitoring
- Lending must evolve to understand and monitor highly volatile assets like tech companies with intangible, future-based value.
- Real-time risk assessment during the loan lifecycle is essential, not just initial diligence.