Venture Debt - United States | Statista Market Forecast

Total Capital Raised in the United States' Venture Debt market market is forecasted to reach US$22.41bn in 2024.
Traditional Venture Debt leads the market with a projected volume of US$19.19bn in 2024.
When compared globally, the United States is expected to generate the most Capital Raised ( US$22.41bn in 2024).
Amidst a growing appetite for riskier investments, the United States' Venture Debt market is experiencing a surge in popularity among startups.

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 United States has been experiencing significant growth in recent years.

Customer preferences: One of the key reasons for the growth of the Venture Debt market in United States is the increasing preference of startups for alternative financing options. Startups are often in need of capital to fuel their growth and expansion plans, but traditional bank loans may not be easily accessible to them due to their limited operating history or lack of collateral. Venture Debt provides a viable alternative for startups to raise capital without diluting their equity. This has made Venture Debt an attractive option for startups, especially in the technology and biotech sectors, where there is a high demand for capital to fund research and development, hiring, and marketing activities.

Trends in the market: The Venture Debt market in United States has also been driven by the increasing number of venture capital investments in startups. Venture capital firms are increasingly using debt as a complementary financing tool alongside equity investments. This trend has been particularly prevalent in the technology sector, where startups have been able to raise substantial amounts of equity financing from venture capital firms. By using Venture Debt, startups can leverage their equity capital and extend their runway, allowing them to achieve key milestones and increase their valuation before raising additional equity funding.

Local special circumstances: The United States has a well-developed ecosystem for startups, with a large number of incubators, accelerators, and venture capital firms that actively support early-stage companies. This supportive ecosystem has created a conducive environment for the growth of the Venture Debt market. Startups in the United States have access to a wide range of debt providers, including banks, specialized debt funds, and venture debt firms. This competitive landscape has led to favorable terms and conditions for startups, including lower interest rates, flexible repayment schedules, and the ability to secure debt financing without providing personal guarantees or collateral.

Underlying macroeconomic factors: The strong macroeconomic conditions in the United States have also contributed to the growth of the Venture Debt market. The country has experienced a prolonged period of economic expansion, with low interest rates and ample liquidity in the financial markets. These favorable conditions have made it easier for debt providers to raise capital and offer attractive terms to startups. Additionally, the United States has a deep and liquid capital market, which provides debt providers with access to a diverse investor base and enables them to raise capital at competitive rates. In conclusion, the Venture Debt market in United States has been growing rapidly due to the increasing preference of startups for alternative financing options, the growing trend of venture capital firms using debt as a complementary financing tool, the supportive ecosystem for startups, and the favorable macroeconomic conditions. These factors have created a conducive environment for startups to raise debt financing and fuel their growth and expansion plans.

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.