When the billing bench suddenly failed last month, the closure was forced when the company lenders called the startup loan. At the end of 2023, Confis Freight Convoy faced financial challenges, a leading loan company Hercules Capital in order to take control of the company in order to get better the investment.
Divvy Homes, who sold Brookfield Properties for around $ 1 billion last week, left some shareholders of the company without any payment, said Techcrunch last week. Although the special role of Divvy lenders on sale is unclear, the company borrowed $ 735 million from Barclays, Goldman Sachs, Cross River Bank and others in 2021.
After so many poor startups were financed in 2020 and 2021 from the famous diligence, many of the weakest startups didn’t succeed. But the data suggest that we have not yet reached the pit, and many others will die in 2025, and the debt of the undertaking plays a role after investing $ 41 billion in 2339 contracts, which is a record for the time in 2021, According to the Silicon Valley Bank.
“We reach the end of the rope for many companies,” said David Spreng, founder and general director of the Venture Daler Growth Capital supplier.
Concerned about the future of their investments, lenders are increasingly pushing startups for sale to attenuate potential losses, imagine that Spreng.
He estimates that almost every lender disturbed the company in his portfolio, John Markell, a managing partner at the long -term advisory company Armentum Partners.
While the debt may also help rapidly developing startups to satisfy their money needs without selling VCS fragments, also increases the risk of negative results. Too much debt in comparison with the income or money reserves of the START -UPs could cause the sale of a forced fire in which the company is sold for a fraction of its previous value. Or lenders may resort to exclusion so that they can apply for any basic assets used to secure the loan to get better at least part of their investments.
If startups can persuade latest or existing VC to inject more money, buying more equity, they can avoid taking the lender if they lag behind payments or other features of their contracts. For example, some Project debts contracts They have requirements for liquidity and working capital indicator. If the startup money drops too low, the lender may take motion.
But investors are reluctant to finance startups that grow too slowly to justify the valuation they achieved in 2020 and 2021.
“There are so many restless companies at the moment,” said Markell. “Many unicorns will not be in business soon.”
Spreng also predicts that many startups will have no other selection but to sell at a low price or closing this year. But for now, most lenders still hope that these startups will find a house via sales and even a fire sales.
In situations where lenders force the acquisition, capital investors generally do not receive much money, and often do not even earn money, said Markell. Losses in startup investments are a risk that Venture Capital knows.
When sales occur, Spreng claims that many of these transactions remain undisclosed resulting from the unfavorable results of Venture investors. Nobody desires to take a circle of victory when they lose money on sales.
However, because debts have priority in repayment, the lenders of the ventures are less more likely to lose their entire capital.
But the risk associated with the debt of the undertaking didn’t decelerate its attractiveness. According to 2024, in response to the latest debt emission of the project, it reached 10 years of 53.3 billion dollars, in response to Pitchbook data. A major part of this capital was directed to AI, with remarkable examples, including Coreweave, which secured $ 7.5 billion in debt financing, and OpenAI, which obtained a credit line price $ 4 billion.