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Arc seeks to revive venture debt.

Venture debt provides benefits. If you’re creating a capital-intensive firm, it may be cheaper and better than seeking stock. However, some have appeared unimpressed recently.

It’s fascinating that startup finance business Arc Technologies is now entering the $30 billion venture loan sector with a Silicon Valley marketplace. Arc, launched in 2021, has received $180 million in stock and debt, including a $20 million Series A investment in 2022.

Eltrys quoted San Francisco business co-founder and CEO Don Muir as saying, “Venture debt isn’t for everyone.”

“In 2021, you could snap your fingers and raise a $50 million equity round with no customers and no revenue,” Muir added. “That’s gone. Today, equity and debt investors value fundamentals. Stronger and more resilient organizations have more debt capital available. Debt is cheaper than equity, making it more enticing.

Brex, family offices, credit funds, and new banks swiftly provided alternative funding while Silicon Valley Bank was enjoying its time. Muir says all that activity makes it hard for companies to decide where to go.

This is what the Arc Capital Markets debt marketplace solves. Arc Capital Markets lets enterprises sign up in 10 minutes and get indicative lending arrangements from a network of lenders for up to $250 million in five days.

The company’s underwriting engine uses past financial data to pre-qualify businesses and connect lenders based on their qualifications, financial health, and profile. Arc claims its marketplace may save firms months and thousands in expenses since startups obtain financing conditions for free.

Our underwriting system calculates credit criteria that indicate the firm is a good fit for a term loan from one of our middle-market lenders, Muir said. We can also identify the five top lenders who will likely provide indicative terms for that firm quickly.

Although it’s early, Arc’s platform seems to be doing well. Over 350 deals have been concluded, with approximately $100 billion under management.

The business plans to launch new banking products and lender experiences in the first half of 2024, including a new product Muir refused to discuss.

“A much larger swath of venture-backed tech companies are looking at venture debt today than just a few years ago, and we’re here to make that market,” Muir said. “We want to help founders and CFOs weather the venture capital funding storm and grow efficiently with minimal dilution.”

Eltrys Team
Author: Eltrys Team

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