Arc Launches Venture Debt To Serve Explosive Demand From VC-Backed Banking Clients

Don Muir

Co-Founder & CEO

In March 2023, the startup community was shaken to its core. The regional banking system - the backbone of Silicon Valley for 4 decades – was in freefall. While the media was primarily focused on covering the billions in frozen deposits that jeopardized millions of tech jobs and stalling innovation, another storm was quietly brewing. 

That story revolved around the rapid pullback in long-term debt capital many of these startups had come to rely on to grow through a tight venture capital environment. Together, SVB, FRB, and their smaller peers held a 70%+ share of the venture debt market, and demand for venture debt was at an all-time high. That changed overnight when SVB’s near collapse disrupted the regional banking system: as those banks evaporated, so did the associated supply of venture debt.

For all of the reshuffling and action in tech-focused private credit markets in the months since that crisis, little ultimately has changed: finding venture debt is harder and more painful than it used to be for startups. Larger banks have tried to replicate the playbooks of their regional counterparts, but haven’t cracked the code fast enough to replace the former incumbents. Non-bank credit funds have gotten more creative in underwriting the risk, but their lack of a deposit base translates to less attractive terms for the startups they serve. They’ve realized that underwriting venture debt deals – which relies heavily on understanding a startup’s cap table – is a hard-learned skill that can't be easily learned overnight.

Yet, even as the credit supply has tightened, today’s startups are in a better position than ever before to take advantage of venture debt. They are leaner, more capital efficient, and resilient through a sharp downturn. Meanwhile, those who are able to offer up Venture Debt are doing it using the same slow, antiquated, and mostly offline processes of their defunct peers. The result is months of back and forth. Months of document gathering, due diligence, negotiations, and more. Months that startups don’t have, and tens of thousands in legal fees to boot. In short, there’s a market mismatch with demand at all-time highs and supply at all-time lows.

That’s where Arc comes in. We’re capitalizing on that opportunity, and taking a deliberately different approach with the launch of Arc Venture Debt.

With Arc, startups can apply and qualify for venture debt in minutes. Simpler, more straightforward term sheets come in a matter of days - not months.

It's as simple as completing the pre-qualification questionnaire, integrating your finance stack, uploading your company docs, and receiving tailored financing terms.

We regularly and programmatically underwrite your startup and pre-qualify you for better rates and higher credit limits using AI as you scale so you can focus on building, while having the peace of mind that you can access capital at the click of a button.

And it doesn’t stop there.

Arc Venture Debt works seamlessly with Revenue Financing to further expand the capital stack. Through Arc, startups can quickly turn their future receivables into cash to reinvest in their growth. When their next equity round is closed, they can tap into Arc Venture Debt to unlock more capital, completing the funding cycle.

They can deposit this cash into their operating account and instantly deploy it throughout their business, diversify it across the world's largest banks through a yield-bearing bank sweep equipped with $5M FDIC insurance eligibility¹, or invest it in U.S. Treasury Bills that generate up to 5.5%+ APY² (as of 9/5/23)—all in one platform.

Our North Star has always been to unite capital and cash management in a simple, yet powerful platform, to make them work better and faster together. Launching Arc Venture Debt is another step in that direction.

We welcome you to jumpstart your next venture debt raise with us.


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