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Venture Capital Startups

Back in Vogue, Tech Lending Funds Cater to Pre-IPO Workers

More Silicon Valley investors are jumping into one of the most obscure niches in private tech finance: lending money to startup employees to profit from the windfall when the companies go public.

New employee loan funds are aiming to raise hundreds of millions of dollars, backed by institutional investors, private wealth managers and high-profile venture capitalists like Peter Thiel. They are based on the promise of big returns and the prospect of acquiring stock in hot tech startups. But questions remain about how much demand there really is for these types of loans, and whether the deals make sense for employees, who often end up paying borrowing costs many times that of a typical bank loan.

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