Covenant Lite #17: The New Face of Venture Lending
SVB’s collapse was supposed to cripple the market. Instead, it unleashed the biggest boom in venture debt history.
When Silicon Valley Bank (SVB) collapsed in March 2023, it sent shockwaves through the startup ecosystem. As the dominant player in venture debt, SVB accounted for an estimated 60% to 70% of the market. Its sudden failure left startups scrambling for financing, and many predicted a severe contraction in venture lending.
What occurred was the opposite. First Citizens Bank stabilized the SVB venture franchise after acquiring it — providing stability at a time when startups needed it most. New lenders also entered the market looking to take market share from the newly weakened SVB.
The result was that the venture debt market not only rebounded but reached new heights the next year. In 2024, U.S. venture debt deal value soared to $53.3 billion, surpassing the previous record of $42.3 billion posted during the heady times of 2021.
Interestingly, while the dollar amount raised set records in 2024, the total number of deals actually declined by 20% relative to 2023. As a result, the average deal size more than doubled year-over-year, reflecting a shift toward larger, more substantial financings, particularly in capital-intensive sectors like artificial intelligence, clean energy, and life sciences.
Some of the more prominent venture debt deals done in 2024 include:
CoreWeave – $7.5 billion (2024): Secured a record-breaking debt facility led by Blackstone and others to build out GPU-powered data centers.
Crusoe Energy – $3.4 billion (2024): Finalized a significant financing deal with Blue Owl Capital to fund a new data center in Texas that will lease computing capacity to Oracle and OpenAI.
Lambda Labs – $500 million (2024): Received a substantial loan from Macquarie to expand its AI infrastructure capabilities.
In a venture debt market where a $100 million deal used to be considered large, billion dollar deals such as CoreWeave and Crusoe Energy mark a clear departure from the past. It is notable too that the lead lender for each of these loans is not a traditional venture debt player, but a more traditional alternatives player expanding into the market.
Today, startups seeking debt financing have more options than ever before. The void left by SVB’s brief absence opened the door for non-bank lenders and private credit firms to expand aggressively into the venture space.
Groups like Hercules Capital, TriplePoint, Runway Growth Capital, and Cadma Capital (a new Apollo affiliate) seized market share. Even BlackRock made a move, acquiring European venture lender Kreos Capital to add venture debt capabilities to its massive private credit platform.
Less Equity, Less Cushion
Increased interest in the venture debt is coming at a time when cash runway for many venture-backed companies has been getting shorter by the month. Some venture-backed companies have been living off their 2021 round, finding it difficult to raise incremental capital in the current environment. Less cash on a company’s balance sheet obviously makes lending a riskier proposition.
In addition, the likelihood of fresh venture capital stepping in to recapitalize or fund a bridge round is lower in today’s environment. Venture debt is typically underwritten with the assumption that if a startup runs into trouble, its equity backers will be willing and able to stabilize the business. But this may not be true until VC fundraising improves.
All of this raises the risk profile for lenders. With that in mind, deals today are often sized more conservatively, with more attention paid to cash runway, revenue visibility, and tangible assets like recurring revenue streams.
Yet despite these risks, lenders are eager to deploy. Floating-rate structures and high spreads mean venture debt portfolios are offering returns in the low to mid-teens — highly attractive in a world where traditional leveraged lending has compressed.
A New Landscape
Venture lending in 2024 looks very different than it did two years ago:
It's bigger — dollar volumes are at all-time highs.
It's more concentrated — fewer, larger financings dominate the market.
It's more diversified — with more non-bank and private credit lenders alongside legacy players.
It's slightly riskier — as equity backstops become less reliable and companies stay private longer.
In many ways, the collapse of SVB accelerated trends that were already in motion: a broader institutionalization of venture lending, more private credit involvement, and bigger checks for the most capital-intensive technologies. The result is a market that is more competitive, more structured — and far more critical to the startup ecosystem than ever before.
Covenant Lite