Private Markets

Growth and venture debt

Leading investors discuss the opportunities, risks and changed landscape of this emerging segment of private credit.

Key takeaways

  • 01

    An emerging asset class

    Growth and venture debt together constitute an expanding area within global finance, and a growing opportunity within private credit.

  • 02

    Attractive characteristics

    The asset class offers advantageous loan structuring with predetermined repayment schedules, comprehensive security, amortization, and priority in the capital structure. Lenders can also benefit from their borrowers’ growth.

  • 03

    Supported by macro trends

    The 2023 disruption to the regional banking sector, along with structural shifts, have positioned private credit managers to take a leading role in the space, while the increased cost of equity financing has made debt more appealing for growth and venture-backed companies.

It’s an exciting time for growth and venture debt investors, with a wider range of high-quality opportunities emerging in recent years. Companies are staying private for longer, while venture capital and growth equity funds continue to invest capital, all of which creates more appetite among borrowers.

In the U.S., there were roughly US$35 billion worth of deals in the space in 2024, according to Pitchbook. It estimates the combined growth and venture debt markets in Europe at around €17 billion, a growth of more than 25% from the year before, with the average deal size rising to €1.7 million in 2024.

Growth and venture debt offer exposure to innovative companies in the tech and healthcare spaces, without many of the risks of venture capital and growth private equity. As specialized forms of lending, they require experience measuring risk through complex lending performance indicators, and expertise in structuring loans with downside protection.

Until the 2023 disruption of the regional banking sector, a single lender controlled a significant portion of the venture debt market in the U.S. In its wake, established private debt managers, have taken the lead in sourcing opportunities and receiving beneficial terms from borrowers.

We spoke to a few of our investors about growth and venture debt as an asset class, what they’re watching in the space today, and where they see the biggest opportunities.

Chart depicting venture debt deal volume and average deal size from 2014 to 2024.

Authors

Marten Vading
Managing Director, BlackRock Growth Debt
Ross Ahlgren
Managing Director, BlackRock Growth Debt
Mat Pearse
Director, Growth Debt Product Strategy

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