Espresso Capital secures $200 million USD credit facility to fund tech firms in red-hot venture debt market

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Espresso Capital has closed a $200 million USD credit facility from KeyBank, a Cleveland, Ohio-based financial institution.

Espresso, a provider of venture debt, said the funds will go toward expanding its lending activities to high-growth technology and healthcare companies in Canada, the United States, and the United Kingdom.

Introhive and Q4 Inc. are among the more than 300 companies that have received venture debt from Espresso.

Espresso already has existing credit facilities with Bank of Montreal (BMO) and Scotiabank for undisclosed amounts.

Introhive and Q4 Inc. are among the more than 300 companies that have received venture debt from Espresso. In early October, SaaS startup Thentia secured a $15 million credit facility from Espresso to scale its government technology software.

Kevin Cain, head of marketing for Espresso, told BetaKit that Espresso went with KeyBank because the financial institution was aligned with its mission and values. “They took the time to really understand our business and were able to structure a facility that allows us to maximize our venture lending activities going forward,” Cain said.

The new facility will likely be a boon to Espresso as competition in the Canadian venture debt space heats up.

In 2020, $378 million in venture debt was invested across 64 deals in Canada, more than doubling the amount invested in 2019. While the number of deals fell significantly from 129, a trend that seems to be continuing, the size of venture debt deals continues to grow.

RELATED: Q1 2021 highest on record for Canadian venture capital with $2.7 billion invested

The amount invested in 2020 was four times the size of deals compared to the previous two years. And, 2021 is on the same track with the CVCA reporting that the first half of 2021 saw a total of $292 million in venture debt invested.

Not surprisingly the increased activity in venture debt comes as more venture debt firms are entering the space or beefing up their presence in Canada.

Silicon Valley Bank (SVB) increased its Canadian footprint in mid-October, opening a Montréal office and placing Karl Théard in charge. The Montréal office joined those in Vancouver and Toronto that SVB had previously opened.

At the time of his appointment, Théard told BetaKit: “Competition is fierce, and it is good for the innovation economy.”

One of the more established presences in venture debt is CIBC Innovation Banking, which has been a major force of venture debt and innovation investing in Canada since it acquired Wellington Financial in 2018.

RELATED: CIBC Innovation Banking looks to fuel Canadian tech rocketship as ecosystem soars

The firm’s president, Mark McQueen, told BetaKit earlier this year that CIBC doubled down on innovation investing over the last year even as some banks pulled back amid COVID-19. More recently, the group decided to tackle markets beyond North America by establishing an office in London, England.

But other financial institutions are getting in on the action too.

RBCx launched a new venture debt offering in September. The product is part of a range of services from Sid Paquette’s newly-constructed innovation banking group, which includes debt capital solutions, advisory support, a partner network, and support for other RBC investments, such as in the venture fund space.

Venbridge, a provider of growth loans to Canadian tech firms, struck a new partnership in August with tax credit and grant consulting provider Business Improvement Group to help tech companies receive research and development credits more quickly.

When it comes to Espresso, KeyCorp comes to the firm with assets of approximately $187 billion as of September 30. Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of 1,000 branches and approximately 1,300 ATMs.

Feature image by NordWood Themes via Unsplash

Charles Mandel

Charles Mandel

Charles Mandel's reporting and writing on technology has appeared in Wired.com, Canadian Business, Report on Business Magazine, Canada's National Observer, The Globe and Mail, and the National Post, among many others. He lives off-grid in Nova Scotia.