Why Heels Are Back in Vogue
Non-dilutive financing for growth-stage companies has become a prime liquidity leveraging tool.
Amid mounting inflation and a decelerating IPO market, global venture capital funding witnessed a staggering 48% decrease in H1 23. This downturn particularly hit growth-stage investments. As a consequence of the unstable global markets, stakeholders - from investors to boards - have shifted their focus from traditional financing methods, finding non-dilutive financing increasingly vital.
Pitchbook and the National Association of Venture Capital have recorded alarming drops in venture capital funding in the US. Figures declined from $345 billion in 2021 to a mere $238 billion the following year. This tightening of capital flow has spotlighted non-dilutive funding, an attractive proposition for thriving tech companies backed by venture capital.
Liquidity Group's CEO, Ron Daniel, commented, "We’ve transformed non-dilutive funding into an important alternative,” especially in the volatile VC equity-funding climate.
Cementing this trend, Liquidity Group, now the globe’s leading non-dilutive capital lender, reported a 360% surge in demand in Q2FY23. Their data from 64 nations revealed notable upticks in demand in:
APAC: +393%
MENA: +372%
India: +410%
EU: +327%
US: +297%
While non-dilutive financing was once the domain of traditional banking institutions, 2023 marks a transformative year with Machine Learning and AI integration.
Highlighting the innovation, Mr. Daniel said, “Thanks to our decision science-based financial models and proprietary analysis systems, we are able to issue term sheets for financing solutions in the range of $4-120M, 60 times faster than the industry standard."
“This changes everything for how high-growth companies can scale quickly,” he said.
This paradigm shift augments the rate at which burgeoning companies can scale.
Case in point, Automation Anywhere, an RPA software specialist, recently embraced non-dilutive funding post a significant equity funding round. Even after securing $1 billion in equity, endorsed by influential VCs like SoftBank and New Enterprise Associates, the firm opted for venture debt. Arranged chiefly by Hercules Capital, this venture debt valued at $200 million will be channeled into product development and strategic acquisitions.
Similarly, Sydney's Protecht Group obtained $12 million USD from MARS Growth Capital to bolster its international presence. Post a $30M Series A round in February 2022, Protecht made significant inroads into the US market, targeting financial service entities and enlarging its EMEA footprint. Faced with the need for rapid global outreach, they too looked towards non-dilutive financing.
“Thanks to our decision science-based financial models and proprietary analysis systems, we are able to issue term sheets for financing solutions in the range of $4-120M, 60 times faster than the industry standard, “ said Mr. Daniel. “This changes everything for how high-growth companies can scale quickly.”
Integrating sophisticated technology into lending not only expedites the process but provides firms with periodic health reports, equipping them with data beyond the purview of even the most meticulous CFOs. This mechanism also adds a layer of security to the investment process, which is of paramount importance in today's financial landscape.
Concluding the trend, Daniel remarked, “If top-performing startups considered VC funding as a badge of success, they’ve now discerned that non-dilutive financing is not just a viable alternative but a complementary avenue.” He envisages 2023 as a landmark year in the financing world, marking the mainstreaming of non-dilutive financing.
Liquidity is the world’s leading pioneer of bespoke technology for private credit, powered by advanced infrastructure with AI at its core. It defines a new standard in capital allocation through a nexus of the sharpest minds in private credit and technology.
Proven at scale in Liquidity’s own multi-billion-dollar private credit business, this technology deploys capital faster than any firm in capital markets history—with unmatched speed, precision, and adaptability across North America, Europe, APAC and MENA.
Liquidity develops bespoke technology infrastructure for banks and asset managers, embedding intelligent decision science across the full credit lifecycle from origination to compliance, while serving visionary growth-stage and mid-market companies in 45+ sectors through its own structures and funds.
Built on trust and backed by leading institutions including MUFG Bank Ltd., Spark Capital, KeyBank, Cross River Bank, Meitav Dash, IDB Bank, and others. Visit liquidity.com.
