London-based European Venture Partners (EVP) has launched a $130 million venture debt fund, its second in five years.
EVP II is a leveraged debt fund and Deutsche Bank’s Alternative Assets Solutions Group will underwrite it, while the European Investment Fund of Luxembourg will provide guarantees.
The fund plans to make debt investments alongside venture capitalists making equity investments in European and Israeli startups, says Marten Vading, an EVP director. Each deal will average about $2.4 million.
Vading will manage the fund alongside Ross Ahlgren, Maurizio Petitbon, Raoul Stein and Geoff Woolley from the firm’s offices in London, Stockholm and Tel Aviv.
Venture debt is a financing option for early and mid-stage companies that want to build out infrastructure and buy hardware. Venture debt reserves the equity placed by venture capitalists for expenses related to research and development, marketing and personnel.
For the venture-backed startup, debt financing reduces the company’s equity dilution by slowing the company’s burn rate of cash reserves and also lengthens the amount of time between rounds of private equity financing. For venture capitalists, venture debt leverages the capital already invested in a company by adding a new source of funding to the company’s balance sheet.
Silicon Valley Bank in Santa Clara, Calif. is a major venture debt lender, as is Comerica Bank-California in Palo Alto, Calif. and Dominion Ventures in Walnut Creek, Calif. Boston-based Summit Partners closed a $465 million subordinated debt fund last week.
European Venture Partners’ first fund, a $191 million pool closed in 1998, has placed debt in 70 companies in 10 European countries.