Venture Debt - Asia | Statista Market Forecast

The country in Asia is set to witness the Total Capital Raised in the Venture Debt market market reaching US$14.76bn by 2024.
In this region, Traditional Venture Debt is expected to maintain dominance with a projected market volume of US$13.62bn by 2024.
When looking at global figures, the United States is anticipated to lead in Capital Raised, with US$22.4bn in 2024.
In Asia, Venture Debt is gaining traction as a preferred capital raising option for startups due to its lower equity dilution compared to traditional funding.

Definition:

The Venture Debt market refers to a form of equity and debt financing combination, which is used to finance early stage and growth stage capital-backed companies. Besides equity funding rounds, business can seek venture debt that minimizes ownership dilution and governance requirements to increase the cash runway to reach the next milestone or even provide a cushion for delays.

Structure:

The market consists of two segments:
- The Traditional Venture Debt market refers to a form of debt financing that is often provided to venture-backed companies to either buy new equipment, meet a deficiency of short-term capital, or support expansion plans.
- The Growth Venture Debt market refers to a form of debt financing that is often structured with warrants or options, which provides a rapid development stage in which businesses can support their long-term oriented growth plans.
The market data comprises of the amount of capital raised, number of deals, and average deal size.

Key players in this market are companies such as Wells Fargo and Hercules Capital.

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Venture Capital
Venture Debt funds are sponsors by governments

The Venture Debt market in Asia has been experiencing significant growth in recent years, driven by customer preferences, trends in the market, local special circumstances, and underlying macroeconomic factors.

Customer preferences: Asian customers have shown a growing interest in Venture Debt as an alternative financing option for startups and growth-stage companies. This preference can be attributed to several factors. Firstly, Venture Debt allows companies to raise capital without diluting their ownership stakes, which is particularly appealing to entrepreneurs who want to maintain control over their businesses. Additionally, Venture Debt offers flexible repayment terms, allowing companies to manage their cash flow more effectively. Lastly, Venture Debt provides a faster and less bureaucratic process compared to traditional bank loans, making it an attractive option for companies in need of quick funding.

Trends in the market: One of the key trends in the Venture Debt market in Asia is the increasing number of venture capital-backed startups and growth-stage companies. These companies often require additional capital to fuel their expansion plans, and Venture Debt has emerged as a viable financing option to meet their needs. Moreover, the growing presence of venture capital firms in Asia has contributed to the development of a robust ecosystem that supports Venture Debt financing. These firms not only provide funding but also offer valuable industry expertise and networks, making them attractive partners for startups and growth-stage companies.

Local special circumstances: Asia is a diverse region with unique market dynamics in each country. While Venture Debt has gained traction across Asia, there are some local special circumstances that have influenced its development in specific countries. For example, in countries like India and China, where there is a large pool of startups and growth-stage companies, Venture Debt has become an important source of capital to fuel their rapid growth. On the other hand, in countries like Japan and South Korea, where there is a more mature startup ecosystem, Venture Debt has been used to support companies in their expansion plans and provide additional working capital.

Underlying macroeconomic factors: Several macroeconomic factors have contributed to the growth of the Venture Debt market in Asia. Firstly, the region has experienced strong economic growth in recent years, creating a favorable environment for startups and growth-stage companies. This economic growth has attracted both domestic and foreign investors, leading to an increase in venture capital funding. Secondly, low interest rates in many Asian countries have made debt financing more affordable, making Venture Debt an attractive option for companies looking to raise capital. Lastly, the increasing number of successful exits and IPOs in the region has generated positive returns for venture capital investors, further fueling the growth of the Venture Debt market. In conclusion, the Venture Debt market in Asia is experiencing significant growth due to customer preferences, trends in the market, local special circumstances, and underlying macroeconomic factors. As more startups and growth-stage companies seek alternative financing options, Venture Debt has emerged as a valuable tool to support their growth and expansion plans. With the continued support of venture capital firms and favorable market conditions, the Venture Debt market in Asia is expected to continue its upward trajectory in the coming years.

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on the amount of capital raised, the average of deal size and the number of deals.

Modeling approach / Market size:

Market sizes are determined through a combined top-down and bottom-up approach, building on a specific rationale for each market segment. As a basis for evaluating markets, we use data from OECD, annual financial reports of key players, industry reports, third-party reports, publicly available databases, and survey results from primary research (e.g., the Statista Global Consumer Survey). In addition, we use relevant key market indicators and data from country-specific associations, such as GDP, CPI, number of small and medium-sized enterprises (SME), new businesses registered (number) . This data helps us estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the relevant market. For example, the S-curve function and exponential trend smoothing are well suited for forecasting digital products and services due to the non-linear growth of technology adoption.

Additional notes:

The market is updated twice a year in case market dynamics change. The impact of the COVID-19 pandemic and the Russia-Ukraine war is considered at a country-specific level.

This report presents a comprehensive analysis and additional information on the Financial market, in a PDF format.

Venture capital is the term used to call the financial resources provided by investors to startup firms and small businesses that show potential for long-term growth. It has become a very important source of capital for entrepreneurs, who often have problems with financing their needs through risk-averse banks. Venture capital investments incorporate a high level of risk as only some of the VC-backed companies develop into successful and highly profitable businesses. In 2020, the leading venture capital backed company worldwide was the Manbang Group, which based in Nanjing, China.