You invest again in a shareholder subordinate loan, but receives a fixed rate plus a potential venture kicker. Even though I’m not a big penny-pinard when it comes to venture capital, I’ve seen the new Seedmatch Venture Debt model.
Fixed term and interest
In contrast to the usual start-up investments, this is a bullet-term subordinated loan with a fixed interest rate of 4 to 5 years. The positive aspects are the semi-annual interest payment, the calculation method (act / 360) and the daily settlement.
The half-yearly interest payment not only has the advantage of increasing the effective yield, but above all of the fact that the investor already receives parts of his interest claim after six months. This money can not be lost in a possible bankruptcy.
The calculation method act / 360 also leads to a higher effective interest rate. For those who do not know what this calculation method is: act is the abbreviation for actual , ie actual days, ie in 2016 the effective interest rate would be at 8% annual interest: 8% x 366/360 = 8,13%.
The daily billing leads to a higher total return for early birds, which is only fair, as their capital is also tied up longer. In addition, Early Birds will also receive a one percent bonus on the interest rate over the entire life of the current Hey Paula offer. I suppose that will be similar in the future.
In addition to the fixed interest is the so-called venture kicker. The Venture Kicker is a bonus at the end of the term, which can be up to 30% of the investment amount. The height of the venture kicker depends on the achievement of certain turnover thresholds. This variable part of the return is the main difference to other previous offers.
With this additional remuneration, the return can reach 11% -15%, depending on the starting position. Together with the advantages already listed, Seedmatch’s offer is the most attractive model on the market in terms of return.
I have already hinted that I do not find fixed-income models for venture capital particularly attractive. At 11% -15% return I might invest depending on the company. However, this would have to be the fixed interest rate and not the return on venture kicker. For 9% interest, I would eventually invest in companies that have at least a) recoverable assets (after servicing other claims, therefore unlikely) and / or b) a positive operating cash flow. Nevertheless, I think it is very good that there is this new offer, because
- Investors with a higher risk appetite have an additional opportunity to invest in exciting projects with a different payout and thus risk-return profile.
- it’s better than the other fixed-income models I’ve looked at and
- Young companies have another opportunity to finance themselves through the crowd.