In May 2010, Barry Vitou, a partner in our London office, sponsored the publication of the British Venture Capital Association’s (“BVCA”) report on “The Rise of Venture Debt in Europe”. The BCVA is the leading industry body and public policy advocate for the private equity and venture capital industries in the UK. The report is the first to capture the overall size of the venture debt industry across Europe and was presented to a packed audience of BVCA members at our London office to raise awareness among the UK and European private equity industry of the availability and use of venture debt.

Venture debt has been around since the 1960s in the U.S., but is a more recent phenomenon in Europe. The European venture debt industry officially launched in 1998 with the arrival of European Venture Partners (now Kreos Capital). Since then, a bevy of other venture debt providers have emerged on the scene, including Silicon Valley Bank which entered the EU in 2005 and whose investments now equal approximately US$1.5 billion across the EU.

The report provides detailed facts and statistics about an industry in Europe for which public data normally is not easy to obtain. Of the many interesting facts to emerge, the report revealed:  

  • Close to 400 companies have received venture debt from UK venture lenders with over US$600 million invested in UK companies, over US$600 million in European companies and over US$300 million in companies in the rest of the world (mostly in Israel);  
  • Companies in the internet, biotech and semiconductor sectors had the highest average loan size (US$5 million); and  
  • Half of the VCs that responded to the survey sent out by the BVCA indicated that up to 40% of their portfolios use venture debt.  

The launch event included a panel discussion chaired by Barry Vitou and a representative from each of the BVCA and three leading venture debt providers, namely ETV Capital, Kreos Capital and Noble Venture Finance. The panel dispelled some of the myths surrounding the venture debt industry and, on a promising note, concluded that after the economic turbulence of 2009 during which activity in the venture debt market slowed (and mirrored the situation in the private equity market), venture lenders are very much open for business and looking for new deals in 2010.