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When the accounting starting bench suddenly failed last month, the shutdown was forced when the company’s creditors called for the start -up loan. At the end of 2023, the convoy digital freight company was faced with financial challenges, the management of the Hercules Capital entrepreneur lending company to undertake the management of the company to restore investment.
Divvy Homes, which sold Brookfield Properties for about $ 1 billion last week, left some of the company’s shareholders without payment, Techcrunch announced last week. Although the specific role of Divvy creditors in the sale is not clear, the company borrowed $ 735 million Barclays, Goldman Sachs, Cross River Bank and others in 2021.
After so many weak start -ups were funded in 2020 and 2021, with famously loose care, the weakest start -ups have already failed. But the data suggests that we have not yet understood and many people die in 2025. And the business’s debt will play a role after investing $ 41 billion in $ 2339 stores, which is 2021, time, for 2021. According to the Silicon -Valley BankOr
“For many companies, we get to the end of the rope,” said David Spreng, founder and CEO of Venture debt -provider Runway.
Due to the future of investment, creditors are increasingly making start -ups to sell themselves to minimize possible losses – he believes.
Almost every lender has a difficulty in their portfolio, estimates that John Markell, the managing partner of the Armentum Partners Venture debt consultant, estimates.
While debt can help rapidly growing start-ups to meet their cash requirements without selling the company’s pieces to VCS, this also increases the risk of negative results. Too much debt can result in forced fire sales compared to the income or cash reserve of the starting business, where a company is sold for a fraction of its previous value. Or creditors can use the exclusion so they can claim any basic tools used to ensure the loan and reimbursed at least part of the investment.
If start -up businesses can persuade new or existing venture capital to inject more cash by buying more equity, they can avoid the deeds of the lender if they miss out on payments or other aspects of their agreements. For example, some business debt agreements There are requirements for liquidity and functional capital. If a starting cash falls too low, the lender can take steps.
However, investors are reluctant to maintain the financing of start-up businesses, which are too slowly growing to justify the high evaluation of the sky in 2020 and 2021.
“There are currently so many troubled companies,” Markell said. “Many unicorns will not do business soon.”
Spreng also predicts that many start -ups have no choice but to sell or close at low prices this year. But for the time being, most lender still hopes that these start -up businesses can be home to sales, even fire sales.
In situations where creditors are forced to buy, stock investors usually do not receive much of the money paid and often do not even take back the money, Markell said. Losses for investing in start -ups Risks from risk investors knows that they occur.
When sales are made, Spreng says that many of these transactions are not missed because of the unfavorable results of risk investors. No one wants to make a victory when he loses money when he sells.
However, as debt owners are prioritized in repayment, business creditors are less likely to lose all capital.
But risk debt risks did not slow down the appeal. In 2024 the new business debt issuance reached 10-year highest $ 53.3 billion Pitchebook data– Most of the capital has been directed to AI companies, with remarkable examples, including Coreweave, which received $ 7.5 billion in debt financing and Openai, which received a $ 4 billion credit line.
