Venture Debt Lender Applied Real Intelligence (“A.R.I.”) Successfully Completes Oversubscribed Raise of Seed Capital

LOS ANGELES--()--Applied Real Intelligence (“A.R.I.”), a venture debt investment management company headquartered in Los Angeles, with offices in San Francisco and Dallas, announced the successful closing of an oversubscribed multi-million dollar raise of seed operating capital.

Zack Ellison, A.R.I.’s Founder and Managing General Partner, commented: “The success of our seed round marks an important growth milestone for our firm. The appetite for our offering exceeded our expectations and due to very strong interest from investors, the round was well oversubscribed and was significantly upsized to meet demand.

"In this seed round of operating capital, we accepted capital from family offices, venture capitalists, A.R.I. Advisory Board Members, investment professionals, attorneys, and business operators, among others. The funding will be used to accelerate A.R.I.’s already rapid growth by adding key personnel to A.R.I.’s investment, operations, and marketing teams, enhancing systems and infrastructure, partnering with top-tier service providers, and expanding the marketing budget to expedite fundraising.”

A.R.I. is now focused on dual tracks of raising capital for A.R.I.’s Venture Debt Opportunities Fund and sourcing exceptional venture debt transactions in which to deploy capital from the Fund.

Institutional investors, including family offices, endowments, pensions, asset managers, investment consultants, and fund-of-funds now consider venture debt one of the hottest asset classes in the market and some are scrambling to gain exposure.

According to PitchBook, through the third quarter of 2021, private debt had the largest year-over-year fundraising increase by strategy (trailing 4-quarters) at 25% followed by venture capital at 12%. Venture debt lies at the intersection of these two strategies given it typically falls within the private debt segment of investment portfolios and is highly correlated with activity in venture (equity) capital.

According to a recent research report (“Accelerating Out of the Pandemic”) produced by the Alternative Investment Management Association (AIMA) and KPMG, investors have taken a more granular approach to optimizing their portfolios during the pandemic by demanding new hybrid products that accomplish specific portfolio objectives. When asked to choose the most popular investment strategies (where there is a significant uptick in interest and a belief that there will be continued future growth in the next 12 months), private credit (33%) was one of the top responses, following only hybrid hedge / private equity products (46%) and digital assets (36%).

Quality venture debt deal flow is ample and A.R.I. has a robust pipeline of attractive deals lined up for 2022. Data from PitchBook and the National Venture Capital Association (NVCA) shows that the first three quarters of 2021 saw $238.7 billion in U.S. VC activity, which significantly exceeds 2020's previous full-year record of $166.4 billion. This boom in venture equity transactions has facilitated the increase in the number of venture debt opportunities, with U.S. venture loan volume hitting an all-time record of more than $25 billion in 2021 while also exceeding 3,000 financings for the third straight year.

With investor sentiment and market conditions primed to support the continued growth of the venture debt market, A.R.I. is distinctly well positioned around the following five points heading into 2022:

  • StrategyVenture debt has produced 15-20%+ returns with loss rates of less than 25 bps, along with low volatility and correlation, over the past two decades. A.R.I.’s venture debt strategy is differentiated to provide access to "innovation" as an asset class, superior risk-adjusted returns, security of capital, and strong portfolio diversification benefits. The majority of incumbent funds are oversubscribed and are not taking commitments from new allocators.
  • Mission – A.R.I. prioritizes diversity, equity, and inclusion in its investment mandate and aims to democratize the availability of minimally dilutive capital and “do well while doing good” by unlocking the massive economic potential in underserved segments of the market. A.R.I. is the only institutional-quality venture debt manager that credibly supports this mission.
  • TeamA.R.I.’s leadership team has significant experience producing stellar results in venture debt, tech banking, and fixed income investing. Strategic hires are planned for 2022 to further bolster an already strong group.
  • Operations – A.R.I. has partnered with best-in-class service providers across the platform, including legal, fund administration, tax/audit, banking, loan servicing, human resources, compliance, valuation, information technology, cybersecurity, and data analytics.
  • Market Timing – A number of factors are coalescing to provide strong tailwinds for A.R.I.’s investment strategy, including very low yields in other fixed income offerings, high valuations across most asset classes, investors seeking opportunities in technology and innovation, and increasing concerns around inflation (which favors venture debt's floating-interest rate structures).

About Applied Real Intelligence LLC (“A.R.I.”)

A.R.I. is a Los Angeles-based venture debt investment manager focused on providing financing solutions to innovative, high-growth, VC-backed companies in recession-resistant sectors and underserved regions in North America. A.R.I. has dual missions of: (1) democratizing access to capital for all founders; (2) providing A.R.I.’s investors with access to “innovation” as an asset class, superior risk-adjusted returns, security of capital, and strong portfolio diversification benefits. To learn more, please visit www.arivc.com.

Contacts

Zack Ellison, Managing General Partner, zellison@arivc.com, 310-881-3893 (ext. 100)