Venture Debt: special loans for Start-ups

The life of Start-up founders of many well-glitzy and glamorous than it actually is. Business Meetings with champagne and wild Parties like in the movies, burea

Venture Debt: special loans for Start-ups

The life of Start-up founders of many well-glitzy and glamorous than it actually is. Business Meetings with champagne and wild Parties like in the movies, bureaucratic obligations are, in reality, such as the creation of a detailed business plan. The meticulous documentation and Review of the company is required not only by regulators, but primarily by the Financiers of young companies.

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editor in the economy.

F. A. Z. Twitter

Because, unlike established companies, Start-up know-ups as a source of money usually only one Option: the equity capital. However, a new form of financing, the so-called "Venture Debt", spills out of America more and more to Germany and to Europe. Even if the idea is not new, could founder in Germany, therefore, to greater flexibility in the selection of your financing. But what is it exactly that Venture is Debt, anyway?

Roughly speaking, it is debt capital that is provided by risk investors. The companies pay back the money, similar to a loan from the Bank, at regular intervals, with interest and principal payments, and the from the beginning. Only that the funds do not come from the Bank, but from a specialised Venture Debt funds, which requires, however, quite high rates of interest. In General, the Start-ups for a classic debt financing, in the Form of Bank loans is not in question. The financial institutions require personal guarantees or the presentation of balance-sheets, which are not able to offer Start-ups.

company on Venture Capital dependent

Instead, the young firm were donors so far, mainly on the money of risk capital, including Venture Capital companies (VCs) are called dependent. They collect money from investors in a Fund. The pooled money flows in the financing rounds of Start-ups. The price of the Start-ups pay for the equity is high, because the venture capital business will receive shares in the young company. Be paid to the Venture capital on the "Exit" as it is called in the jargon. This happens when the Start-ups go public or are sold. The resulting profit is then divided among the investors.

While the classic equity companies have already been funded in the very early stages, this is not considered Debt for the Venture. This is especially suitable for more established companies, says Götz Gleichmann, head of Bridge To Growth (BTG) in an interview with F. A. Z., The company has launched the Venture-Capital firm Redstone, a Venture-Debt Fund that is intended to allow this form of financing. The Fund is designed for a period of eight years and a volume of 125 million euros.

The companies are actually "Low-risk candidate," said the same man. In order to qualify for Venture Debt in question, had everything: the product, the market, the Team. In addition, the founders must round have already several financing behind. In addition, the company and the business was checked the model several times on the heart and kidney also "Due Diligence" was called.

Updated Date: 28 July 2020, 08:20

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