Building A Better Electric Future
Electrifying our transportation infrastructure is the linchpin to a sustainable, cleaner future. And yet, despite the leap forward in battery technology over the past two decades, the production of energy storage is mired in complexity and is unsustainable in its current form. The bulk of the batteries used today to power electric vehicles and other infrastructure are expensive and require heavy metals, whose extraction presents both environmental and geopolitical risks. Solving this problem is the key to unlocking the next chapter of our sustainable electric-powered future.
Enter Mitra Chem. Led by Founder & CEO Vivas Kumar, Mitra Chem is revolutionizing how batteries are built and produced by creating iron cathode materials for American battery manufacturers. Unlike traditional NMC and NCA batteries that dominate the electric landscape today (and whose production requires access to rare materials - few of which are present onshore), Iron-based cathode batteries are less expensive, and their supply chain more durable. This comes at a time where the Inflation Reduction Act is reigniting innovation in the space. Mitra’s designation as one of the only IRA compliant manufacturer of next generation cathode battery material uniquely positions the Company to put those policy dollars to work towards building a better electrified future.
An innovation success story in an otherwise tumultuous market
Propelled by a truly innovative new technology and buoyed by a favorable public policy climate, Mitra Chem is a success story in reinvigorating American infrastructure and manufacturing. Fresh off a $40M first close of their Series B in August 2023, led by General Motors, and with participation from Social Capital and other notable investors, they are planning to expand production to support growing demand from US auto manufacturers.
And yet, for all of this success, Mitra is also a first hand example of just how difficult the past year has been for even the most innovative venture backed startups. Access to capital - both debt and equity - proved harder than expected for an otherwise seasoned team with broad experience in tapping capital markets.
While working through the last mile of their Series B close, with timelines slipping, Mitra Chem engaged Arc to provide short term liquidity. In record time, and despite multiple counterparties and significant complexity, Arc was able to provide Mitra a multi-million dollar Venture Debt facility, allowing the company to keep their foot on the gas and close its Series B from a position of strength, without risking a cash crunch.
Mitra Chem engaged Arc to provide short term liquidity. In record time, and despite multiple counterparties and significant complexity, Arc was able to provide Mitra a multi-million dollar Venture Debt facility, allowing the company to keep their foot on the gas and close its Series B from a position of strength, without risking a cash crunch.
Raising Equity in 2023 was hard, even for experienced operators
So why did raising a Series B take longer than expected for a company that was widely seen as one of the strongest bets in deep tech? And why was accessing debt more painful than they had imagined? For that answer we need to go back to the beginning of 2023.
At the time, we were at the low point of a VC drought carried over from the back half of 2022, and investors across the board had adopted a lower risk appetite. As such, they were more cautious about their investments.
That caution translated to significantly more due diligence than had once been the norm, stretching once rapid capital raises into drawn out affairs. For context: growth rounds have always required a lot of coordination between the lead and other participating investors, and that back and forth only grew in the first part of 2023, with venture funding down over 50% year-over-year in Q2 2023. In sum, no matter the level of excitement for a given investment, market participants were more cautious, more calculated, and ultimately slower in getting to final signature.
Venture debt too was affected, especially post regional bank crisis
When equity rounds take longer to close, companies can either cut costs and try to extend their runway, or raise capital to bridge the gap.
The former is diametrically opposed to the signals that underpin a growth round: divesting to stretch makes little sense for a company painting a picture of strong growth to investors. Mitra had been making progress ramping up early production of its cathode materials and garnering growing auto manufacturer interest. Slowing down those conversations was simply not an acceptable strategy for a business at an inflection point.
Mitra’s finance team had managed its balance sheet conservatively, ensuring plenty of liquidity. They entered the raise process with plenty of cash to ensure healthy runway. And yet, as timelines stretched and timing the close of the round proved imprecise, good governance dictated that the team inject additional capital into the business as a contingency for the worst case scenario.
Unfortunately for Mitra, debt markets for growth stage venture backed companies had been shaken by the collapse of SVB. Once the go-to player in the space for venture debt, SVB was on the sidelines nursing a slow recovery from its near collapse. Alternate players were still trying to make sense of the impact of SVB’s failure on their own credit portfolios, and pulled back on venture lending too. Where Mitra would have normally been able to call on the usual suspects of venture banking to inject capital into the business, they all of a sudden found themselves in very limited company.
The few traditional offline lenders and credit funds they had prior relationships with proved slow and uncompromising. Worse yet, they failed to appropriately underwrite Mitra’s dominant position in the market and the step-function growth in the business that would be unlocked alongside its Series B.
Arc was able to quickly understand the business and provide the right financing
When Mitra approached Arc in April, they were growing disillusioned with lender conversations, who were slow, unresponsive, and generally ‘risk-off’ in the wake of SVB’s failure. They had lost weeks of precious time in offline, operationally burdensome diligence, sharing financials with lenders whose teams were turning over and whose credit committees were unwilling to show them proper attention.
They were surprised to find that Arc was able to produce initial term sheets in a matter of days. In a 5 minute onboarding process, Mitra integrated its accounting and banking APIs under NDA and shared relevant details surrounding the status of its current raise. Arc turned around a $2M Venture Debt term sheet within 48 hours.
Even more surprising was Arc’s startup-friendly structure: unlike most traditional bridge loans, Arc’s capital was competitively priced, without warrants or complex covenants; amortization was perfectly tied to the close of their Series B; and unlike traditional non-bank credit funds, Arc was able to add in a competitive cash management and treasury component to the offer to further lower the blended cost of capital.
Even as terms were being finalized, Arc helped shepherd conversations with existing debt providers and Series B investors to get them comfortable with the proposed facility: standing up inter-creditor agreements, working through guarantees and ensuring DACA compliance.
“Arc stepped up when it mattered the most. At a time when the traditional banks have turned their backs on the startup ecosystem, Arc showed us what the future of startup financecan be for Silicon Valley: safe, reliable, and software-driven. The strength of Arc’s partners gives my Board of Directors the peace of mind that our venture funding is safe. Meanwhile Arc’s frictionless everyday cash management experience coupled with the highest risk-free yield in the market allows us to maximize our runway while putting our finances on autopilot. Arc was instrumental in helping us close a successful Series B from a position of strength. They quickly got us the millions in capital we needed to stay focused on closing the equity round, and have proven to be a trusted long-term cash and treasury management partner that we can scale with from Series B through IPO.” - Vivas Kumar, Founder & CEO of Mitra Chem
A conversation that started with debt continued with cash management
Beyond the speed and structure of venture debt, the big difference maker for Mitra was Arc’s integrated Cash Management platform. Tying - the act of requiring cash deposits in exchange for offering a debt facility - is usually positioned as an onerous condition by most offline banks. In the aftermath of the regional bank crisis, most startup CFOs have an aversion to being forced to store 100% of their cash with a community bank that’s prone to bank failure. Arc’s full-service platform turns this onerous requirement into a competitive advantage for CFOs. By partnering with Arc, Mitra gains access to Arc's network of cash management partners, allowing it to diversify their funds across different investment products and financial institutions. In one frictionless software interface, Mitra diversified its fresh Series B capital across multiple FIs, while managing its everyday cash management operations with fee-free operating accounts, and earning north of 5.4% APY across MMFs and Treasury Bills.
Today, despite the facility being closed and the Series B several months in the rearview mirror, Mitra not only continues to leverage Arc’s Cash Management platform, but has deepened its commitment and made Arc its primary corporate cash management partner.
“Arc quickly assessed our needs and provided a bridge capital solution that allowed us to remain focused on closing our growth equity round. Through the process, they have proven to be a trusted long-term capital and banking partner that we are excited to work alongside as we scale.” - Vivas Kumar, Founder & CEO of Mitra Chem
From Bridge round to Capex Investments
Mitra is now focused on expanding production of its proven technology and is working to finalize the buildout of a new plant here in the US. Of course, their unique manufacturing needs inform a very specialized build out. With the books just closed on the Series B, Mitra’s finance team immediately dove back into another round of capital markets conversations to secure financing for further product development and capacity expansion.
As an Arc customer, they knew about Arc’s Capital as a Service offering: a private capital markets arm for several venture funds, focused on supporting their portfolio companies’ various financing needs. Through CaaS, Arc partners with a diverse range of regional bank and non-bank credit funds to offer a wide array of senior debt options to its customers. Where these partners provide the capital, Arc provides both access to the best companies in the market and the cash management solutions these offline banks and credit funds need to delight their modern customers.
Rather than pursuing dozens of private credit transactions with different lenders, Mitra decided to engage Arc to simplify and accelerate the process. Arc - who already had line of sight into Mitra Chem’s financial picture and comprehensively mapped the various credit boxes of its various capital partners - could easily identify which lenders would support the deal, and exactly what information was needed to produce term sheets.
WIth a single, simple application, Mitra Chem was able to jump start the process of finding the right capital partner. And because of Arc’s unique construct, they were able to do so while retaining their prized cash management platform rather than needing to move to an offline bank.
The future of startup finance
Mitra Chem’s experience is a case study for not only the utility and flexibility of the products Arc offers, but also the vision of the future that Arc is building. Mitra was able to access both capital and cash management within a single platform, and as their operations (and needs) changed, so did the financial products that were available to them.
Mitra Chem is pioneering the future of battery technology, disrupting a multi-trillion dollar legacy industry. Arc is fueling innovation through intelligent financial products.
That’s the future of startup finance: Arc.
Outsource your next debt raise with Arc Capital Markets.