Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
As I write to you, SaaS and cloud stocks are busy setting fresh all-time highs and as we’ve seen, venture interest in modern software companies is pushing more money into the sector. But despite it appearing to be an incredibly good time to raise equity funding, venture debt and revenue-based financing appear to be having a moment. So why are more folks talking about and raising debt to help power their startups, even when valuations are high and there is a lot of venture capital to be raised? As with all explorations of complex, evolving trends, there’s no one answer. But, some data from a 2019-era survey on venture debt and a conversation I had with equity-free SaaS finance shop Element Finance’s John Gallagher (Element is a Scaleworks spinout) help explain what’s going on. Let’s start with how big the venture debt world is and how fast it is growing and then turn to what’s powering its expansion.