Tech Unicorn Fivetran Closes on $125 Million in Debt

Sarah McBride, Bloomberg News

Cables run into terminal ports on the Sberbank and SberCloud Christofari supercomputer during an event to mark its launch into commercial operation inside the Sberbank PJSC data processing center (DPC) at the Skolkovo Innovation Center in Moscow, Russia, on Monday, Dec. 16, 2019. As Sberbank expands its technology offerings, the Kremlin is backing legislation aimed at keeping the country's largest internet companies under local control by limiting foreign ownership. , Bloomberg

(Bloomberg) -- Data startup Fivetran Inc. has taken a $125 million loan from Vista Credit Partners, highlighting a funding option for startups that’s become more desirable during the tech downturn, and also harder to get.

In the 11 years since creating Fivetran, most recently valued at $5.6 billion, co-founder and Chief Executive Officer George Fraser said he had never thought about taking on debt. That included two years ago when company raised $565 million, buying competitor HVR, and during its other funding rounds from firms including Andreessen Horowitz, though Fraser said banks had offered the startup loans.

The calculus changed last year, when equity markets plunged and interest rates started climbing to heights not seen since the early 2000s. Raising equity in that climate wasn’t an option, Fraser said, and neither was an initial public offering. “Who knows what the right multiples are in this market?” he said. “It would be very uncertain.”

So on the advice of board members, Fraser started talking with a handful of debt providers at the beginning of 2023. Earlier this month, the company closed on a delayed-draw term loan, meaning Fivetran can withdraw cash in stages at pre-arranged times.

The startup isn’t the only one borrowing. Venture debt deals have soared in recent years, though loans have become harder to get over the last few months after the collapse of Silicon Valley Bank, a major lender to startups. Still, even after the bank’s crisis, financiers say strong late-stage companies can still line up debt.

Fivetran, which provides the plumbing that helps customers like JetBlue Airways Corp. connect and analyze disparate pieces of data, has set ambitious expansion goals. Fraser described the loan as a kind of insurance policy. “There was no possibility of getting into a corner this year, but what about next year, or the year after that?” he said. “We want to make sure we can execute.”

When conditions improve, Fivetran will get back to its dreams of an eventual IPO, Fraser said. “It’ll change,” he said. “I don’t think it will be a huge amount of time.”

(Corrects to remove JPMorgan from list of Fivetran customers in the penultimate paragraph.)