Ozy's 12.8% Venture Loans Ended Up in U.S. City Pension Funds

(Bloomberg) -- Scandal-plagued startup Ozy Media Inc. raised money from high-profile investors. It also took on some debt, a portion of which wound up in the portfolios of public pension funds. 

Ozy raised about $9.5 million in venture debt that carries a 12.8% interest rate and matures in 2023, according to regulatory filings. The debt, which appeared in filings in the first quarter of 2020, comes from two funds operated by Western Technology Investment, based in Portola Valley, California. The funds’ investors have included city pensions in Chicago and Boston. The firefighter and police pension of San Antonio and a pension fund for Iowa also committed capital to the funds, according to data compiled by Bloomberg.

The Ozy debt is a small portion of both funds’ total holdings. The Venture Lending & Leasing IX fund, which held the majority of the Ozy venture debt, had net assets of $233 million as of the end of June, according to the latest filings. The high interest rate on the Ozy investments is not out of line with the other holdings in the funds, which generally accrue between 11% and 15% of interest.

Venture debt is an alternate financing source for startups. Western Technology Investment’s funds have lent money to companies including Facebook Inc. and Google, according to its website. 

Representatives for Ozy and Western Technology Investments declined to comment. Representatives for the pension funds either declined to comment or did not respond to requests for comment. 

Ozy has been in turmoil after the New York Times reported that the startup’s Chief Operating Officer Samir Rao impersonated a YouTube executive while soliciting an investment from Goldman Sachs.

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