In a move that has left many in the venture debt community stunned, BlackRock, one of the world’s largest asset managers, has announced its acquisition of Kreos Capital, a London-based venture debt lender. This deal marks BlackRock’s entry into the venture debt space, with an estimated $5.68 billion worth of loans originated across over 750 transactions.
Why Venture Debt?
Venture debt allows investors to gain exposure to venture capital investments while minimizing risk. However, for asset managers like BlackRock, which is accustomed to handling large funds and underwriting substantial loans, the logistics of venturing into this space can be daunting. Writing small checks for a few million dollars may not be worth the hassle, especially considering the firm’s existing LP base might not be able to participate in smaller venture debt funds.
The Acquisition of Kreos Capital
By acquiring an existing fund like Kreos, BlackRock has effectively circumvented many of these logistical challenges. With its already established team and LP base, the asset manager can now tap into the lucrative venture debt market with minimal disruption. This strategic move also provides BlackRock with a foothold in late-stage startups across Europe and Israel.
Why Europe?
One question that arises from this acquisition is why BlackRock chose to focus on Europe instead of targeting the larger startup ecosystem in the United States. While it’s true that there are opportunities for venture debt in Europe, Kreos’ presence and success in this region make it an attractive acquisition target. However, it’s possible that BlackRock may look to expand Kreos’ lending operations into the US market.
What Does This Mean for Venture Debt?
This deal has several implications for the venture debt landscape:
- Scale: The entry of a large asset manager like BlackRock into the venture debt space could bring much-needed scale and liquidity to this asset class.
- More Options: With more players entering the market, startups will have access to a broader range of funding options, including nondiluted capital from established investors.
- Increased Competition: As more large credit players and asset managers enter the space, competition for venture debt investments may increase, driving innovation and efficiency in the market.
Conclusion
BlackRock’s acquisition of Kreos Capital marks a significant development in the venture debt ecosystem. While there are challenges associated with writing small checks for a few million dollars, this strategic move provides BlackRock with a foothold in late-stage startups across Europe and Israel. As more large players enter the space, we can expect to see increased scale, liquidity, and competition in the market.
Related Topics
- BlackRock: One of the world’s largest asset managers.
- Deal Dive: A series exploring major deals and transactions in the tech industry.
- EC Market Analysis: In-depth analysis of market trends and developments in the tech sector.
- EC Venture Capital: Coverage of venture capital investments and trends in the startup ecosystem.
- Kreos Capital: A London-based venture debt lender acquired by BlackRock.
About the Author
Rebecca Szkutak is a senior writer at TechCrunch, covering venture capital trends and startups. She previously covered similar beats for Forbes and the Venture Capital Journal.
