Corporate Finance Division
Steel Company Venture Capital
The steel industry has a rich and prosperous history. It is considered the backbone of the modern economy. It experienced remarkable technological dynamism, entrepreneurship and has enjoyed significant economic, political, and strategic importance. Even globalization and the emergence of the latest technologies has not dented its clout. Western nations no longer dominate the industry.
Since the establishment of steel mills, there have often been times when steel producers were facing an imbalance of supply and demand. Over-capacities in the sector became the new normal when China, the world's largest producer of steel, ramped up its production and flooded the markets, including the United States, with cheap steel: U.S. steel imports peaked in 2015, when the trade deficit reached $745.66 billion. This figure fell to around $734 billion U.S. dollars in 2016. In 2015, as a result of weak demand from China's domestic construction sector and an overall decline in GDP growth, the Chinese steel industry encountered its first annual contraction in about 25 years.
Fostering Growth without Diluting Equity:
For Steel companies at critical stages of development, debt can serve as a key financing option to foster growth, with minimal dilution of equity ownership. At Synergy Capital Markets, not only do we understand the industries of our portfolio Steel companies, but we also understand the growth process - and occasionally the growing pains - they undergo.
When venture debt is used appropriately, we believe entrepreneurs gain the following benefits:
Able to raise capital in a way that benefits the team and the business as a result of the greater flexibility offered by venture debt than traditional forms of debt financing
Have more time between equity rounds to build the business and achieve critical milestones, which creates potential for greater valuation
Retain a larger ownership stake in the company prior to an IPO or other liquidity event
Achieving milestones quickly in many cases also means reaching the IPO stage more rapidly