Venture Debt - GCC | Statista Market Forecast

The Venture Debt market market in the GCC country is projected to reach US$68.04m in 2024.
Traditional Venture Debt is expected to dominate the market with a projected market volume of US$66.12m in 2024.
When compared globally, the United States is anticipated to generate the most Capital Raised (US$22.4bn in 2024).
Venture Debt is gaining popularity among startups in the GCC, offering alternative financing solutions for capital raising in the region.

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 GCC has been experiencing significant growth in recent years, driven by a combination of customer preferences, market trends, local special circumstances, and underlying macroeconomic factors.

Customer preferences: In the GCC region, entrepreneurs and startups have increasingly turned to venture debt as an alternative source of financing. This is partly due to the fact that venture debt allows them to raise capital without diluting their ownership stakes. Additionally, venture debt offers more flexibility than traditional bank loans, as it often comes with less stringent collateral requirements and repayment terms. This has made it an attractive option for startups looking to fund their growth and expansion plans.

Trends in the market: One of the key trends in the Venture Debt market in GCC is the increasing number of venture capital-backed startups. As the startup ecosystem in the region continues to mature, more venture capital firms are investing in promising startups, providing them with the necessary capital to grow. Venture debt has emerged as a complementary financing option for these startups, allowing them to leverage their existing venture capital funding and further fuel their growth. Another trend in the market is the growing interest from international venture debt providers in the GCC region. As the startup ecosystem in the GCC gains prominence on the global stage, international venture debt firms are recognizing the potential for high returns in this market. This has led to an influx of international venture debt providers, offering startups in the region a wider range of financing options.

Local special circumstances: The Venture Debt market in the GCC is also influenced by local special circumstances. One such circumstance is the presence of sovereign wealth funds in the region. These funds, which are typically backed by the governments of GCC countries, have played a significant role in supporting the growth of startups through their venture capital arms. The availability of venture capital funding from these sovereign wealth funds has created a favorable environment for venture debt providers, as startups in the region are more likely to have a strong financial backing.

Underlying macroeconomic factors: The growth of the Venture Debt market in the GCC can be attributed to several underlying macroeconomic factors. One such factor is the region's increasing focus on diversifying its economy away from oil. Governments in the GCC have been actively promoting entrepreneurship and innovation as a means to achieve economic diversification. This has resulted in the establishment of numerous startup support programs and initiatives, which have in turn fueled the demand for venture debt. Furthermore, the GCC region has a young and rapidly growing population, which has created a large pool of talented entrepreneurs and startups. This demographic advantage, coupled with the region's favorable business environment and access to capital, has contributed to the growth of the Venture Debt market. In conclusion, the Venture Debt market in the GCC is witnessing significant growth due to customer preferences, market trends, local special circumstances, and underlying macroeconomic factors. The increasing number of venture capital-backed startups, the interest from international venture debt providers, the presence of sovereign wealth funds, and the region's focus on economic diversification and entrepreneurship are all contributing to the development of this market.

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.