Venture Debt?
Thoughts on this career path? Which firms are leaders in this space? How does comp and job security compare to direct lending? What skills are most valued in this space? Would appreciate your thoughts.
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Here's some info for you.
https://www.mergersandinquisitions.com/venture-debt-jobs/
SVB does this, but idk if they could be considered a leader in the space. I do think they posted a primer about the space on their website or medium.
Hercules Capital is a large player in the space - often does venture debt securitizations. I don't know much about them reputationally however.
According to that M&I page, comp seemed lower than expected. Kind of surprised. Wonder what it’s like at the senior / MD level.
That article is rather dated (more than 5 years old). Comp has kept pace with any other private credit strategy.
Hmmmm I only have a small sample size, but the two venture debt offers I received were materially below the private credit offers I received. I think you can definitely find venture debt shops that do pay adequately; however, I think the vast majority pay below what you would find in other strategies.
SVB comes up a lot
Hercules is a BDC that’s doing venture debt, there are a couple other BDCs also doing it, smaller checks. I think SVB typically will write checks up to $25mm and take equity. Would think comp is in line with any other private credit shop, potentially with more upside if you’re getting carry since target returns are likely a bit higher and if they are taking equity and you have carry, there is potential for a home run there, which you wouldn’t have at a traditional private credit player.
SVB is the dominant bank in the space by far (60% market share) and PacWest (formerly square 1) is the number two. A number of other banks and funds have entered the space recently including stifle, signature bank, runway growth capital and have began taking market share. The key debt funds in the space are Hercules (like the SVB of debt funds), Trinity capital, and triplepoint although there could be others I am missing. Comp:SVB associate (analyst level): 80k + 15%Pacwest: 60k + 10% + share of warrants (bank gets 80% and deal team splits remaining 20%; total comp probably around 72k)Hercules analyst: 80k + 50%. Happy to expand on this or answer any more questions. Hope this helps.
Currently at SVB as a 1st year Associate and have heard comp progression for the next 4 years is base increases by $10k every year with bonus staying at 15%. Bigger jump happens when you are promoted to VP after senior associate. I am guessing VP all in is around $170 - $180k. Very attractive stock purchase plan and immediate vesting on 401k are nice perks
Thanks for sharing. How can a VP at a boring 1L direct lending fund make significantly more than a VP at a top venture debt shop? Not trying to come across like an ass, just surprised by these numbers.
Question for those at SVB - how are you different from a regular-way bank? What's the primary source of funding and how is it able to get around the regulatory hurdle to do venture deals?
Work at SVB. Not sure about the regulatory aspect of it, but SVB is a public company and lends off their balance sheet like other BBs. Venture debt as a product (specifically growth capital term loans) are essentially short-term runway extension products in between equity raises (which they are underwritten off of). SVB is compensated for this risk through warrants. Because of this, there is obviously a big focus on maintaining relationships with these VCs. For example, if Sequoia is backing a pre-revenue company and is on the board then SVB will not hesitate to extend a term sheet. I don't think the $25m statement above is accurate anymore. The Fintech team has underwritten plenty of large loans to a lot of specialty lenders, and the Corporate Banking team focuses on the clients that have gone public and need larger scale facilities (sometimes syndicated). The bank focuses on 3 different categories of underwriting: investor-dependent (based off next round of funding), balance-sheet dependent (think traditional ABL-lending off AR, etc.), and cash-flow lending for the more mature & profitable companies. Interesting space - definitely some VC-lite analysis of market opportunities, competitive analysis, etc. Other banks are coming into the space like JPM but their teams are mainly ex-SVB
Bump to see if any additional data here, especially on comp
Thanks for the input everyone. Curious if any new data on comp. From what is quoted above, seems surprisingly low, even for an analyst / associate. Don’t know how anyone in CA can live off of that.
Interested in comp too
I work at a direct lender and one of our verticals is venture debt targeted at a specific sector. We don’t hire analysts but 1st year associate comp is >250k.
Sbed. Thank you. That makes more sense than some of the other numbers mentioned.
Without doxing yourself, what DL shops would you say are most comparable to yours / do venture debt?
I think non-bank lenders will generally pay much better. I don’t want to contradict anything the SVB employee said given they are likely better informed but from a market participant perspective we see SVB usually trying to hold a small piece of a venture loan as a way to get generally corporate banking business. Or, they’ve held revolvers for us while we took the term loan. That said, they did sneakily refi us out of a loan last summer which was unfortunate.
We compete with several of the names mentioned. Hercules, Midcap, Kennedy Lewis (new), Runway (new), SVB, BridgeBank, all play in our space as well as a small handful of others. It’s still a relatively small lender set.
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