The Venture Debt or risk debt can be used so that startup of recent creation are able to access capital, in an environment such as the current one, when many of the large mutual funds risk capital (venture capital) have warned that financing will be reduced in the short and medium term.
The Venture Debt is an investment model whereby startup they obtain capital in exchange for a portion of their shares, which can be recovered by the entrepreneurs after payment of the debt.
Unlike Venture Capital, in which the investors or funds that finance a startup become decision makers within the company itself, in the Venture Debtthe investor does not become part of the company.
For Denis Yris, managing partner of the fund Wortev Capitalone of the advantages of venture capital is that it prevents the company’s shares from being diluted among different investors, since they cannot accumulate more than 40% of the company.
Generally, investments Venture Debt happen to the investments of venture capital. Nevertheless, Wortev has developed a Venture Debt model in which it invests in companies that have not received venture capital, especially because they are dedicated to more traditional sectors.
“In Mexico, you have to put your feet on the ground. The entrepreneurial ecosystem is just maturing and compared to the United States, we don’t have as many innovation projects,” says Yris.
This new model begins to be named at a time when investment in venture capital begins to decrease compared to previous years. The venture capital market in Mexico registered an added value of 1,405 million dollars so far this year, which represents a drop of 7.74% compared to the same period in 2021, according to data from the Transactional Track Record analysis platform ( TRT).
the bet of Wortev on sectors such as consumption, tourism and agribusiness allows entrepreneurs to repurchase their shares in a period of up to 10 years, which allows the business to develop until it is able to meet its obligations.
During the presentation of the report Ecosystem of Venture Capital and Growth Equity in Latin America, prepared by Endeavor and Glisco Partners, Vincent Speranza, in addition to the mergers and acquisitions of startups and the possible IPO of some, when the public markets are restored , the Venture Debt It is a financing alternative.
“In Mexico and Latin America there are few Venture Debt initiatives, but I believe that it will eventually come to complement the capital ecosystem,” said Speranza.
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