Publication of The Rise of Venture Debt in Europe

The BVCA, in association with Winston & Strawn, has today published a report on the growing venture debt market in Europe, one of the first studies of its kind.

A comparatively unknown member of the venture capital eco-system, venture debt provides working capital to early stage companies. It allows them to raise extra finance to hit their next milestones and improve their equity valuation at the next funding round. For venture capital firms, venture debt allows them to extend the cash runway of their portfolio companies and supplement their reserves for follow-on investment.

The Rise of Venture Debt in Europe analyses around 400 venture debt investments in early-stage companies in the UK, Europe, Israel and North America between 2005 and 2009. The report sets out discover exactly how venture capital and venture debt firms interact and the impact that they have on high-growth companies.

Key findings include:

- Close to 400 companies have received venture debt from UK venture lenders, with £425m invested into UK companies, £362m into European companies and £199m into the rest of the world (mostly in Israel).

- The amount of venture debt investment peaked in 2007 at £309m invested in 123 deals. Venture debt as a percentage of venture capital was 10.2% in the UK and 5.8% in Europe in the same year, its highest on record.

- Half of the responding venture capital houses currently have up to 40% of their portfolios using venture debt.

- Thirty-three percent of companies in one venture lenders portfolio had a turnover of less than €1m at the time of receiving a loan whereas another 41% had a turnover greater than €5m.

- The average size of a venture loan is £2.1m with a range of £860,000 to £9m. Companies in the internet, biotech and semiconductor sectors had the highest average loan size

- Companies raising their second round of equity were the number one recipient of venture debt. Only 18 investments have been in a first round.

Welcoming the report, Simon Walker, chief executive of the British Private Equity and Venture Capital Association, said:

"Venture capital, perhaps now more than ever, can play a key role in driving economic development and fostering innovation. As a source of finance for high-growth early-stage companies, venture capital is the lifeblood of the entrepreneurial eco-system.

Venture debt is an important component of this eco-system.  The future of the European economy hinges on turning today's start-up businesses into tomorrow's market leaders, and venture debt provides a much needed pool of capital to help achieve this goal."

For further information please contact:

Tom Allchorne, BVCA: +44 (0)20 7420 1807
Scott Sage, Research Project Manager, BVCA : +44 (0)20 7420 1817

Notes to Editors

The BVCA - the British Private Equity and Venture Capital Association - is the industry body for the UK private equity and venture capital industry. The BVCA has over 450 member firms, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers.