LOS ANGELES--(BUSINESS WIRE)--Applied Real Intelligence LLC (“A.R.I.”), an investment management company based in California, announced its first capital close for the A.R.I. Venture Debt Opportunities Fund on March 31, 2023.
A.R.I. is targeting $125 million for its inaugural fund, which will provide short maturity, floating-rate loans, with equity participation rights, to venture-backed startups in North America. The fund will conduct rolling capital closings throughout the year and will hold its final close before year-end.
"Our team has worked tirelessly to position ourselves for success, and we are confident in our ability to deliver strong returns for our investors while providing much-needed capital to the startup ecosystem at a critical time for companies that are navigating an uncertain economic backdrop and very challenging fundraising conditions," said Zack Ellison, CFA, CAIA, A.R.I.’s Founder and Managing General Partner.
A.R.I. is passionate about investing in startups that are providing real-world solutions for common challenges faced by everyday people. The fund is differentiated through its focus on uncovering the hidden gems of Main Street that Silicon Valley has overlooked, helping founders keep the companies they built with debt financing that is cheaper, faster to obtain, and far less dilutive than equity financing.
"The collapse of Silicon Valley Bank and the regional bank lending pullback has created a massive gap in the venture funding market. With no legacy portfolio and institutional-quality investment processes and infrastructure, A.R.I. is ready to deploy capital and support the growth of great companies at a time when other lenders are reevaluating their balance sheets," Ellison commented.
A.R.I. is poised to capitalize on the significant supply-demand imbalance that has emerged in the venture funding market. The availability of debt capital has declined by more than 50%, with no immediate signs of recovery, and equity fundraising remains challenging due to lower valuations, smaller transaction sizes, and longer closing times.
Meanwhile, startups have received record amounts of more than $750 billion in equity capital and $100 billion in debt capital over the last three years, creating a pressing need for more growth capital and refinancings in the future.
A.R.I. has been the leader in opening the venture debt market to new investors who traditionally had not been involved, particularly Registered Investment Advisors (RIAs) and their clients. To increase accessibility and accommodate investors of various sizes, A.R.I. has launched multiple vehicles, including funds open to qualified clients with a net worth greater than $2.2 million, and qualified purchasers with a net worth greater than $5 million.
These funds are readily accessible on the custodial platforms of Schwab and Fidelity, among others. A.R.I.’s service providers include Paul Hastings as fund legal counsel, Northern Trust as fund administrator, and Deloitte as fund auditor.
"We believe our strategy will deliver equity-like returns with the risk of senior debt. For over 20 years, nonbank venture lenders have consistently achieved returns of 15% to more than 20% with low correlation to other investments, leading to a very stable return profile and among the best risk-adjusted returns of any asset class.
"With the increased capital needs of startups and decreased venture capital availability, there is an evolution occurring in venture debt. We look forward to partnering with both investors and startups who share our vision for leveraging this opportunity to fund and scale innovative companies that drive positive change in the world," Ellison concluded.
About Applied Real Intelligence LLC (“A.R.I.”)
A.R.I. is a venture debt investment manager focused on providing financing solutions to innovative, high-growth, venture capital-backed companies in recession-resistant sectors and underserved regions in North America. Learn more about investing in the A.R.I. Venture Debt Opportunities Fund by contacting A.R.I.’s Investor Relations at IR@arivc.com.
