VC player with a difference debuts

We read with interest in the past week about the arrival of new VC firm, Leap Capital.

According to a report in the Australian Financial Review, Leap has raised a $50 million fund that will be targeted at fast growing businesses, rather than start-ups.

The key difference in Leap’s offering is a loan-based model, known as debt funding. At present, Australian entrepreneurs have little option but to trade equity for capital when they wish to grow through external investment.

Leap owner Guy Rupert said he was looking to write loans between $2 and 10 million, for a period of three years. While technology businesses shape as his most obvious customers, Mr Rupert said he was open to partnering with companies from a range of sectors.

Interest rates would be around 12 or 13 percent – obviously high compared to the current market. But provided the short-term loan is paid off smoothly in concert with predicted profit growth, the long-term result would likely be superior than selling-off chunks of a company that subsequently soars in value.

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