Blackstone Eyes Red-Hot Debt Market

With venture capital funding may be limping along, private equity equity titan Blackstone is looking to jump into a growing debt market for tech companies.

Blackstone Eyes Red-Hot Debt Market
Illustration of $100 bills.

With venture capital funding may be limping along, private equity equity titan Blackstone is looking to jump into a growing debt market for tech companies.

Blackstone expects to invest at least $2 billion in technology debt deals over the next few years— its first major push into lending to startups and technology companies, The Information reported Thursday.

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The news is another sign of a cooling venture capital market where cash is becoming increasingly harder to raise at the inflated valuations of last year. Companies looking to extend runway, while not succumbing to the dreaded downround, are likely to turn to debt as a viable alternative to keep companies afloat among some economic uncertainty.

The numbers

Just last week Crunchbase reported that VC-backed startups in the U.S. have raised nearly $15.9 billion in debt in 321 deals through the first seven months of the year, according to our data.

In just July, startups in the U.S. raised more than $1.4 billion in publicly announced debt—far outpacing the $824 million in July last year.

It is important to note that those numbers are not all-encompassing—as many companies do not announce debt raises—and it is not unusual for some startups in areas like fintech to raise debt for working capital.

Nevertheless, the use of debt by tech companies seems to be on the rise. Just earlier this week, New York-based online investing platform Yieldstreet, closed a $400 million warehouse facility.

Now Blackstone will enter a market where it will compete with other big players like Hercules Capital and Silver Lake in lending capital.

In recent years Blackstone has become more aggressive in the tech startup ecosystem. Just this week it participated in the sports league startup Overtime’s $100 million Series D valuing the company at $500 million.

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Illustration: Dom Guzman