Venture debt financial instruments and investment risk of an early stage fund  Cover Image

Venture debt financial instruments and investment risk of an early stage fund
Venture debt financial instruments and investment risk of an early stage fund

Author(s): Szymon Kwiatkowski
Subject(s): Economy
Published by: Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu
Keywords: venture debt; venture capital; start-up financing; early stage fund risk

Summary/Abstract: As market research and data show, even that venture debt financing in Europe increased in last couple of years, for many venture capitalists this form of start-up investing is unknown. Fundraising difficulties in classic venture capital and the significant risk limiting role that debt financing plays in venture eco-system and financial markets in general suggest growing usage of this form of investment. One should expect venture debt as a percentage of venture capital in Europe to grow from ca. 6% to 10% – the level present in the UK. The paper offers a presentation of venture debt mechanism, debt and convertible instruments used in VC industry in Europe and tries to identify, describe and measure, if possible, risk associated with venture debt investment in comparison with classic venture capital investing. As a theoretical proof of the thesis about existence of venture debt specific financial market niche, required risk of return of venture debt is estimated with a use of implied credit spread.

  • Issue Year: 2015
  • Issue No: 381
  • Page Range: 177-184
  • Page Count: 8