Arc Technologies is expanding its services beyond cash management to offer startups access to venture debt.

The neobank’s new marketplace, called Arc Capital Markets, aims to connect startup firms with lenders looking to expand into the venture capital space, said Arc CEO and co-founder Don Muir.

“I launched Arc on a mission to make traditional financial services and capital markets more accessible to the startup ecosystem,” said Muir, who added that last year’s regional bank crisis created a fragmented venture debt industry.

Amid the fractured market, founders historically lack a sophisticated understanding of capital markets and finance, Muir said. 

“Typically they're under-resourced and a lot of them don't have a robust in-house capital markets or finance team like many late stage or public companies do,” he said.

Muir said he has personal experience with the struggles many founders encounter when trying to fund their early-stage firms. The gap has only grown larger in the wake of Silicon Valley Bank’s implosion last year, he added. 

SVB was the de facto bank and source of venture debt for Silicon Valley startups before regulators took over the firm in March, Muir said.

While high quality lenders moved in to fill the void in the months following SVB’s collapse, those lenders lacked distribution, Muir said.

“They were new to the market and needed help. They didn't fully appreciate the underwriting, the distribution and the complexity of this very unique profile business, which is venture backed, typically cash burning and hyper growth,” he added.

Arc Capital Markets sits in between lenders and startups looking for capital, Muir said. The platform helps solve for lenders with manual or redundant application processes, or even those whose processes are entirely offline, he added.

“We can programmatically source through the most optimized debt capital terms available in the tech lending universe, and in one application, our startup CFOs can apply to 100-plus of the most reliable tech lenders who are under [nondisclosure agreements] and exclusive contract with Ark,” he said. “In a matter of days, we can produce multiple pre-qualified term sheets for these businesses, and then work with those businesses to choose the most optimal terms for their use case based on the fundamentals of the company.”

Muir said the platform has received a strong response since its official launch last week.

Within 72 of hours of the launch Arc Capital Markets received $500 million worth of applications from tech startups seeking lenders, he said. 

“We've taken those $500 million worth of applications and now we're processing it through our capital markets SaaS platform with pre-qualified lenders based on the financial profile of those businesses,” Muir said.

So far, Arc’s lender network consists of around 100 banks, Muir said.

“We're focused not on quantity but quality,” Muir said. “We want reliable lenders who will be there not only to provide capital to our customers, but also, in a downside scenario where there's some hiccups along the way, post funding, that these these lenders will be good actors, that they’ll be supportive and partnership oriented with our customers who are raising capital.”

Muir likened Arc Capital Markets to Uber Black, describing the platform as a dedicated concierge service that meticulously vets its lenders.

“That's how we can get faster, better terms on debt financing and ensure that there's partnership orientation between both the lender and our customer,” he added.

It’s free for borrowers to get indicative term sheets through the platform, said Muir. Companies that choose to move forward with one of the term sheets that they sourced through the platform are charged a 1-2% monthly fee, he added. 

Boon to business

Muir said he is confident that the new venture debt platform will serve Arc’s existing startup customers that already use its banking services, as well as draw in new account holders. 

The San Francisco-based fintech, which is not a bank, partners with Stripe for its money transmission services, while Goldman Sachs and Evolve Bank & Trust hold customer funds. 

“It was very intentional that I launched the cash management business years before I launched Arc Capital Markets,” Muir said. “The majority of companies who come to us, specifically, now for Arc Capital Markets see our cash management platform and sign up for the cash management business as well.”

Muir said the platform is intentionally structured to favor companies that decide to store and manage their cash with Arc, as firms that choose to bank with Arc get preferred pricing on the capital product.

Muir has also launched a promotion alongside the new venture debt platform.

Any qualified company using Arc Capital Markets that can’t find a debt provider in a short period of time will receive $10,000, he said.

“That promotion would bankrupt my company if I didn't have all faith and conviction that this product works and it's extraordinarily valuable to fill this gap in the startup ecosystem,” Muir said.