Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Psst. Are you a fast-growing startup that needs to raise money without showing your hand in the cutthroat valuation game?

Have I got a deal for you! Raise debt.

That's exactly what China's Ant Financial is doing, and big time.

Alibaba Group Holding Ltd.'s payments affiliate is looking to borrow more than $3 billion through bank loans or bonds, The Information reported Thursday, citing a person it didn't name.

Ant, which operates Alibaba's Alipay payments service, is the world's second-biggest unicorn, with a $60 billion equity valuation that trails only Uber's $62.5 billion, according to TechCrunch. That estimate is almost a year old, though, after an April fundraising round. It may be worth less, or even a lot more, as CLSA Ltd. believes.

Unicorn Watch
Three of the world's most valuable startups are Chinese
Source: TechCrunch

Either way, in these crazy times of unicorn markdowns -- India's Ola and Snapdeal come to mind -- there's no need to risk a downround if it can be avoided. At the very least, debt allows a company to get cash without escalating an already heady price tag that will make a future IPO harder to sell.

Xiaomi Corp., the Chinese smartphone and gadgets maker, was valued at $45 billion in an April 2015 funding round and has raised total equity of $1.1 billion, according to TechCrunch. Yet it's also taken out at least $1 billion in loans, according to Bloomberg News. The debt has helped it avoid tapping equity investors in the past two years just as that massive valuation comes into doubt.

To be sure, avoiding being put under an appraisal microscope isn't the only reason for a startup to turn to loans or bonds. In fact, it needn't even be the main reason, especially when debt is cheap and freely available. It is a convenient alternative, though, and may be relatively quick to put together compared with the effort of negotiating equity.

Borrowing isn't without its problems. Music-streaming company Spotify AB is one such example. As fellow Gadfly Leila Abboud outlined this week, the company sold convertible debt a year ago with strict terms that increase the interest rate it pays by 1 percentage point every six months until the company holds an IPO, topping out at an amazing 10 percent.

For Ant, which has already raised $4.5 billion through equity, a further $3 billion in debt might give it a lot of runway and plenty of time to avoid the question of how much it's really worth.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at

To contact the editor responsible for this story:
Matthew Brooker at