HSBC launches venture debt offer for Australian scaleups

HSBC Australia has added to the growing options for Australian companies seeking capital launching a venture debt product late stage venture capital-backed scaleups.

It’s the first time a major bank has offered venture debt locally, with the option only appearing in recent years for early stage startups via the likes of OneVentures, Lighter Capital, San Francisco lender Partners for Growth, which has a Sydney office, Leap Capital and LaunchVic-backed Tractor Ventures.

Sydney VC OneVentures is the local market leader in non-dilutive capital having provided more than 20 startups with in excess of $100 million in venture debt.

But it represents less 5% of Australian venture funding, well behind the US, where it’s grown from around 10% of total venture funding in 2017 to an estimated 15-20% now.

HSBC will offer loans worth between $10 million and $30m to Australian scaleups, with nearly $230 million allocated towards lending on that front.

Alan Watters, ANZ Tech sector lead at HSBC said borrowers will have access to a specialised banking services, including access to a range of APIs and digital payment solutions

“As the leading international bank for innovative companies around the world, we’re excited to strengthen our support for Australia and New Zealand’s ecosystem of innovation and help fast-growing scaleup companies in technology and new economy sectors to expand,” he said.

“With the introduction of our venture debt solution, we are able to increase the specialised support we provide to innovative companies who need flexible, long-term, and trusted banking relationships to help them reach their next milestone or capitalise on opportunities as they arise.”

However, not everyone’s a fan of venture debt.

At TechCrunch Disrupt recently, expat Australian Chris Power, CEO of Hadrian, told the audience to avoid venture debt “at all costs” unless “you’re in serious trouble”.

Watters said HSBC has already provided venture debt to two Australian startups, using its US balance sheet, so they know there’s demand.

“We also know from the conversations we have been having with founders, venture capital firms and the wider ecosystem for the last two years that there is a shortfall of capital for late stage growth companies,” he said.

“As a bank, HSBC has been a key partner to the publicly listed technology sector for a long time, supporting these companies as they have transitioned from private to public, such as SiteMinder.”