Applied Real Intelligence holds first close on venture debt fund

Applied Real Intelligence has held a first close for its venture debt fund, ARI Venture Debt Opportunities Fund, Private Debt Investor has learned.

The fund, which was launched in February, may serve as evidence that the venture debt market for US tech start-ups has survived the demise of Silicon Valley Bank and the bankruptcy of its holding company. ARI is joining Hercules Advisor in the effort to fill the void that SVB has left.

ARI, an investment firm based in Santa Monica, California, is not disclosing the dollar value of the close, but did say that the amount was sufficient to execute on the first few deals in its transaction pipeline.

Managing partner and chief investment officer Zack Ellison, who founded ARI in 2018, told Private Debt Investor that the firm is targeting $125 million for the fund. “Our strategy is to keep the fund small so that we can be extremely selective and only invest in our highest conviction opportunities where downside risk is minimised.” However, the firm does plan to increase the targets for later funds.

Asked about its investors, Ellison said: “The registered investment advisers segment is very receptive, as advisers and their clients seek alternative investments that provide high risk-adjusted returns. That is where most of our money is coming from.”

The firm’s name is a play on the widespread (and, in Ellison’s view, misguided) impression that artificial intelligence is displacing the real, human intelligence required to successfully source, execute and manage private investments.

Ellison worked at Scotiabank as an investment banker through the period of the global financial crisis. He was a credit trader at Deutsche Bank from June 2011 to November 2013, then moved to Sun Life Investment Management as a director of US fixed income.