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As the venture market tightens, a debt lender sees big opportunities

By Connie Loizos

David Spreng spent more than 20 years in venture capital before dipping his toe into the world of revenue-based financing and realizing there was a growing appetite for alternatives to venture capital. Indeed, since forming debt-lending company Runway Growth Capital in mid-2015, Spreng has been busy writing checks to a variety of mostly later-stage companies on behalf of his institutional investors. (One of these, Oak Tree Capital Management in LA, is a publicly-traded credit firm.)

He expects he’ll be even busier in 2020. The reason β€” if you haven’t noticed already β€” is a general slowing down in what has been a very long boom cycle. β€œWe’re in the late innings of a very long game,” said Spreng today, calling from Davos, where he has been attending meetings this week. β€œI don’t think the cycle is going to end this second. But where we went from a growth-at-all-costs mentality, boards are now saying, β€˜let’s find a balance between top line growth and capital efficiency β€” let’s figure out a path to profitability.’ ”

Why is that good for Spreng and his colleagues? Because when a cycle ends, venture capitalists get stingier with their portfolio companies, writing fewer checks to support startups that aren’t hitting it out of the park, and often taking a bigger bite under more onerous terms when they do reinvest to counter the added risk they’re taking.

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