May 27, 2020
While much of the economy has been impacted by the COVID-19 outbreak, Runway remains fully committed to its mission of supporting entrepreneurs in building great businesses. Like others in the venture debt and venture capital community, the pandemic has made us reassess our risk tolerance and tighten our lending criteria. A thoughtful and patient approach is needed given the uncertainty surrounding the public health crisis. However, this has not diminished our appetite or capacity to fuel great companies. We have significant dry powder available and are actively seeking lending opportunities across technology, life sciences and consumer industries.
The pandemic has sparked a lot of speculation about the impact on our industry. We’ve spoken with many players in the ecosystem, and there appears to be general consensus about a few predictions:
There is no debate that it’s a much tougher business climate for growth stage businesses now than it was only a few months ago. For some companies, growth debt could be an attractive way to avoid accessing the equity markets while still being able to invest in growing their business. Typically structured as a three to four-year term loan, proceeds are used to fund working capital, growth initiatives and acquisitions. Unlike traditional bank lending, venture debt is available to companies that do not have positive cash flows or significant assets to use as collateral. Most importantly, debt is cheaper than equity and it avoids meaningful equity dilution for entrepreneurs and investors.
While a lot has changed around us, we remain steadfastly focused on supporting great companies and entrepreneurs. We are committed to providing flexible debt solutions to borrowers, particularly in this time of uncertainty. We have significant dry powder to partner with the best companies and enable them to capitalize on growth opportunities now and in the future. If you would like to learn more about growth debt, please feel free to get in touch.