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The Blaine Group, Inc.
A Total Communications Agency
8665 Wilshire Blvd., Suite #301, Beverly Hills, CA 90211
310/360-1499 · 310/360-1498 FAX · E-mail:  devon@blainegroupinc.com

 

FOR IMMEDIATE RELEASE:  December 18, 2007

FOR FURTHER INFORMATION, CONTACT:          

 

Lisa Baker / Bill Kraus
The Blaine Group
310.360.1499 Fax: 1498
lbaker@blainegroupinc.com

HEY, BROTHER, CAN YOU LOAN ME AN IPO?
WHY VENTURE DEBT IS BECOMING OPTION

Newport Beach, CA… California Capital Partners, LLC (CalCap), a venture capital firm focused on small- to medium-sized technology and life sciences companies, understands how difficult it can be for development stage companies to get financing and a fair valuation. CalCap’s managing directors – industry veterans Mark Mansfield, John R. Nelson and Philip B. Smith – have a cumulative 75 years of senior management and investment experience. Now, they are using their combined expertise and market knowledge to contribute to a growing financing trend: venture debt.

Although venture lenders have been around for a long time, their growth in the wake of the dot-com bust has been fast and furious. According to VentureOne, venture lenders loaned almost $2 billion in 2006, up from $434 million in 2002.  Debt comprised 7% of the funds invested in U.S. venture-backed companies in 2006, up from 2% in 2002.

Why the recent growth?  One explanation points to an increasing time to exit events.  According to VentureOne, whereas in 1999 a start-up typically took three years to go public, the current time to IPO is more than six years.  In progressively unstable equity markets and with stringent public reporting requirements, growth companies are choosing to remain private for a while longer before making themselves available to the Street.  As a result, they need more private financing which now is coming in the form of venture debt.

Venture lenders such as CalCap, which has launched a $195 million California Ventures Debt Fund, can infuse much-needed funds into a company in return for interest and, occasionally, convertible warrants.  By foregoing the immediate equity stake that most venture capitalists take, venture lenders are able to pursue aggressive investments while mitigating their own risk profile:  venture debt entails priority rights over equity stakes. 

Entrepreneurs, meanwhile, can look at venture debt as a way to obtain elusive financing without significantly diluting shareholders.  With sufficient cash flow and growth, companies can pay down venture loans on their way to going public and maximizing shareholder value.

“As CEOs continue to seek alternatives to equity financing and shareholder dilution, venture debt will become a more attractive option,” says CalCap’s Nelson.  “For smart investors who understand the risks and rewards of growth financing, the opportunity is tremendous.”  More information on CalCap and their venture debt fund can be found at http://www.calcappartners.com/.

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