Key Takeaways
- • Applied Real Intelligence LLC (A.R.I.), a California-based investment manager, announced the first capital close of its A.R.I. Venture Debt Opportunities Fund on March 31, 2023, targeting $125 million for the inaugural vehicle.
- • The fund will provide short-maturity, floating-rate loans with equity participation rights to venture-backed startups in North America, with rolling closings through the year and a final close before year-end.
- • Founder and Managing General Partner Zack Ellison, CFA, CAIA, positions the fund to fill a funding gap left by the collapse of Silicon Valley Bank and the regional bank lending pullback.
- • According to the firm, the availability of venture debt capital has declined by more than 50%, while startups raised more than $750 billion in equity and $100 billion in debt over the last three years.
- • A.R.I. has launched multiple vehicles for Registered Investment Advisors and their clients, with eligibility thresholds of $2.2 million net worth for qualified clients and $5 million for qualified purchasers.
Summary
Applied Real Intelligence LLC ("A.R.I."), an investment management company based in Los Angeles, California, announced on April 5, 2023 that it had achieved the first capital close for its A.R.I. Venture Debt Opportunities Fund on March 31, 2023. The inaugural fund is targeting $125 million and will extend short-maturity, floating-rate loans with equity participation rights to venture-backed startups in North America. Rolling capital closings are planned throughout the year, with a final close before year-end.
Zack Ellison, CFA, CAIA, Founder and Managing General Partner, said the firm is positioned to benefit from a supply-demand imbalance in venture funding. Per the announcement, the availability of debt capital has fallen by more than 50% with no immediate signs of recovery, and equity fundraising has become more difficult due to lower valuations, smaller transaction sizes and longer closing times. Ellison attributed the gap to the collapse of Silicon Valley Bank and a pullback in regional bank lending, noting that A.R.I. has no legacy portfolio and is ready to deploy capital while other lenders reevaluate their balance sheets. The firm states that startups raised record amounts of more than $750 billion in equity and $100 billion in debt over the last three years, creating a need for growth capital and refinancings.
A.R.I. says it focuses on real-world solutions for everyday needs and on companies it describes as overlooked "Main Street" businesses, offering debt financing it characterizes as cheaper, faster and less dilutive than equity. The firm has also sought to broaden access to venture debt for Registered Investment Advisors and their clients through several vehicles, including funds open to qualified clients with a net worth above $2.2 million and qualified purchasers with a net worth above $5 million. These funds are available on the Schwab and Fidelity custodial platforms, among others.
The announcement cites Paul Hastings as fund legal counsel, Northern Trust as fund administrator and Deloitte as fund auditor. Ellison stated that the strategy aims to deliver equity-like returns with the risk profile of senior debt, citing returns of 15% to more than 20% achieved by nonbank venture lenders over the past 20 years with low correlation to other investments. Investor inquiries are directed to A.R.I. Investor Relations at [email protected].
Zack Ellison, CFA, CAIA, Founder and Managing General Partner, said the firm is positioned to benefit from a supply-demand imbalance in venture funding. Per the announcement, the availability of debt capital has fallen by more than 50% with no immediate signs of recovery, and equity fundraising has become more difficult due to lower valuations, smaller transaction sizes and longer closing times. Ellison attributed the gap to the collapse of Silicon Valley Bank and a pullback in regional bank lending, noting that A.R.I. has no legacy portfolio and is ready to deploy capital while other lenders reevaluate their balance sheets. The firm states that startups raised record amounts of more than $750 billion in equity and $100 billion in debt over the last three years, creating a need for growth capital and refinancings.
A.R.I. says it focuses on real-world solutions for everyday needs and on companies it describes as overlooked "Main Street" businesses, offering debt financing it characterizes as cheaper, faster and less dilutive than equity. The firm has also sought to broaden access to venture debt for Registered Investment Advisors and their clients through several vehicles, including funds open to qualified clients with a net worth above $2.2 million and qualified purchasers with a net worth above $5 million. These funds are available on the Schwab and Fidelity custodial platforms, among others.
The announcement cites Paul Hastings as fund legal counsel, Northern Trust as fund administrator and Deloitte as fund auditor. Ellison stated that the strategy aims to deliver equity-like returns with the risk profile of senior debt, citing returns of 15% to more than 20% achieved by nonbank venture lenders over the past 20 years with low correlation to other investments. Investor inquiries are directed to A.R.I. Investor Relations at [email protected].
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