Eran Davidson is no stranger to the risk capital game – for many years he headed up well-known German VC Hasso Plattner Ventures. Now, he’s onto the next thing. Rather than offering venture capital, he wants to provide startups with loans of between €2m and €5m via his new Berlin-based financial service Davidson Technology Growth Debt.
According to the Berliner Morgenpost, the loans will have a term period of between 18 and 36 months. Startups seeking loans must have been active for at least three years, be profitable and generate around €20m in annual revenue, Davidson said. Even “certain success parameters” are required.
So far, Davidson hasn’t revealed where he’s getting the capital for his new fund from – he’s still in negotiations with a number of investors. He has, however, said that he plans on securing €100m for the fund. Previously, this kind of financing was only offered by international providers such as Kreos Capital.
Why choose debt capital?
Borrowing funds, as opposed to the typical VC route, has a positive effect on return on equity. This is because, as the startup has more money to spend but the amount of equity doesn’t increase, the company’s KPIs increase. Depending on how the loan is structured, existing investors in the startup could also enjoy the advantage that their shares aren’t diluted. In the pre-exit phase both of these factors can be relevant.
Davidson Technology Growth Debt already has a number of big-name advisors on board, including Wellington Partners founder Rolf Dienst, iSteps App Ventures partner Mehrdad Piroozram, serial entrepreneur and investor Morten Sondergaard and Berlin-based hotelier Michael Zehden. The fund’s first investment will be announced after summer.