TLDR:
- HSBC has expanded its venture debt fund from Australia into New Zealand, offering a non-dilutive financing option for start-ups.
- Start-ups can now borrow from $10m to $50m based on their revenue metrics and path to profitability, without giving up ownership stakes.
In recent years, New Zealand start-ups have heavily relied on venture capital for funding, which often leads to giving up ownership stakes in exchange for investments. However, HSBC has introduced a new venture debt fund in New Zealand, offering a non-dilutive financing option for start-ups. Unlike traditional business loans, venture debt from HSBC is based on revenue metrics and path to profitability rather than tangible assets as collateral. HSBC will loan amounts ranging from $10m to $50m for Series C funding rounds, typically seeking around $20m ARR (annualized revenue rate) from start-ups.
While venture debt allows start-ups to retain ownership stakes, it comes with higher interest rates due to the risky nature of start-ups. Start-ups are required to showcase a clear path to profitability within 12 to 18 months to qualify for HSBC’s venture debt. This new financing option complements traditional venture capital funding and aims to help start-ups extend their runway for growth. HSBC’s venture debt fund has already completed deals for start-ups in Australia and is now making its way into the New Zealand market, offering an alternative source of funding for local tech businesses.
