💹Market Analysis

Mezzanine Financing Market Overview

Mezzanine finance is the strategic cornerstone of MZF PROTOCOL's real-world debt thesis. Through a Web3-native architecture, MZF PROTOCOL enables tokenised exposure to subordinated, illiquid, and high-yield debt instruments — historically reserved for institutional private credit markets.

The intention for the protocol is to roll out tokenised fixed senior and mezzanine finance products as it relates to real estate and private equity deals in Australia, before scaling into more mature private credit ecosystems in the United Kingdom and United States. Each region offers distinct structural opportunities:

These differences reflect structural dynamics such as banking dominance, investor appetite, secondary market depth, and regulatory frameworks.

Adoption of mezzanine finance has been historically limited by the dominance of bank lending and a shallow secondary market. However, the rise of non-bank lenders and increasing bank retrenchment has opened the door for structured, subordinated capital. MZF PROTOCOL enters this market with tokenised, KYC-gated deals that offer real-world yield to Web3-native investors while providing tailored capital to local sponsors and developers.

The United States houses the deepest and most institutionalised private credit market globally, with mezzanine debt comprising ~15–20% of transactions. Deals often emerge from private equity-backed Leverage Buyouts (LBOs) and recapitalisations. MZF PROTOCOL will act as a tokenised extension of this market — offering fractional, on-chain access to a debt class traditionally dominated by structured funds and closed-door mandates.

In the United Kingdom, mezzanine financing accounts for ~24% of private credit issuance, benefiting from a mature infrastructure and post-Brexit tightening of bank credit. MZF PROTOCOL aligns with this shift by delivering digitally native mezzanine structures, transparently priced and underwritten via a protocol-governed dealflow engine.

Across all regions, mezzanine finance is evolving from a niche structuring tool to a scalable, yield-generating asset class — driven by:

• The retreat of traditional banks from higher-risk credit,

• Growing demand for non-dilutive capital in private markets, and

• Investor appetite for higher risk-adjusted returns in a rising rate environment.

MZF PROTOCOL's mezzanine finance vertical positions the protocol at the convergence of institutional credit principles and decentralized financial infrastructure. By enabling tokenised access to fixed-term and subordinated debt instruments, the protocol democratises exposure to a historically illiquid and high-barrier asset class. These products are purpose-built to deliver non-dilutive growth capital to real-world borrowers, while offering risk-adjusted yield opportunities to digital-native investors.

As regional strategies unfold—from real estate-backed structures in Australia to private equity-linked mezzanine loans in the US and UK—the protocol remains anchored by a core objective: to establish a globally scalable, DeFi-enabled marketplace for structured private credit. In doing so, MZF PROTOCOL re-frames mezzanine debt not as an exotic instrument, but as an accessible, programmatic building block in the next generation of decentralised credit markets.

DeFi-Enabled Loans Market Overview

Startups — particularly in Web3 and emerging tech — face increasing constraints:

• VCs are more conservative post-2021, with longer cycles, heavier due diligence, and tighter check sizes.

• Founders are dilution-sensitive, especially those nearing TGE or with tokenized products in development.

• Token issuers often need capital before TGE to fund development, audits, GTM, and liquidity planning — but lack off-chain assets or cash flows to support traditional debt.

This creates a pre-TGE funding gap where neither equity nor debt is a clean fit. To date, few — if any — protocols have solved this issue, instead most existing platforms focus broadly on tokenising traditional financial products or real-world assets (RWAs), such as:

• Securitize – tokenises equity, debt, and funds with integrated compliance tools;

• Ondo Finance – Issues tokenised funds backed by bonds and treasuries (e.g., OUSG for US Treasuries);

• Maple Finance – Provides institutional credit via tokenised loan pools; and

• Goldfinch – Specialises in tokenised private credit for emerging markets.

This presents a clear opportunity: MZF PROTOCOL is uniquely positioned to become one of the first Web3-native protocol offering diversified exposure to pre-TGE startups via token rights loans.

A token rights are contractual rights to receive a defined quantity of tokens in the future, typically at a predetermined discount or valuation cap. This structure closely mirrors equity warrants in venture debt markets but is natively aligned to tokenised ecosystems. It allows early capital providers to gain future upside participation in a protocol’s token issuance while providing founders with non-dilutive, milestone-based capital during the most capital-intensive stages of growth.

MZF Protocol supports token rights structures through a Web3-native, KYC-enabled infrastructure that formalises, governs, and automates the issuance, tracking, and settlement of token rights. This process includes:

• Loan origination to qualified early-stage borrowers, typically pre-TGE protocols or startups;

• Issuance of capital in fiat-equivalent stablecoins, repayable in full or convertible upon defined token events; and

• Smart contract-based execution that automates tracking, repayment, and settlement logic.

All token rights governed deals on the protocol are governed by pre-approved term templates and underwritten by standardised risk assessment methodologies, which consider tokenomics, projected market capitalisation, vesting curves, and development milestones. This approach reduces informational asymmetry, enforces capital discipline, and enhances transparency across the transaction life cycle.

Unlike off-chain Simple Agreement for Future Tokens ('SAFT') agreements or manually executed convertible notes, MZF Protocol’s token rights infrastructure enables programmatic issuance, full on-chain auditability, and capital stack transparency. It also facilitates broader lender participation, including DAOs, credit-focused treasuries, and compliant individual investors.

The token rights market represents a high-leverage, capital-efficient opportunity for early-stage Web3 protocols and a new source of real-world yield and token exposure for investors. By formalizing this structure within a DeFi-native, compliance-forward framework, MZF Protocol bridges a critical gap in the startup funding landscape and extends its credit model into the earliest stages of the innovation lifecycle.

Venture Debt Market Overview

MZF PROTOCOL’s venture debt strategy targets early- and growth-stage companies across Australia, with plans to scale into key innovation hubs in the United States and the United Kingdom. The depth and maturity of the venture debt market varies widely between regions:

Convertible debt plays a strategic role within MZF Protocol’s venture debt vertical by offering a hybrid structure that blends credit downside protection with equity upside optionality. These instruments are typically structured as short- to medium-term loans that convert into equity upon predefined triggers—most commonly a future priced funding round or liquidity event. For investors, convertible debt provides an opportunity to participate in early-stage growth while mitigating valuation risk at entry. For founders, it defers dilution and simplifies fundraising mechanics during periods of strategic inflection. Within the protocol, convertible notes are issued on-chain with clearly codified conversion terms, valuation caps, and discount mechanisms, all enforced through smart contract logic. This creates a transparent, programmable alternative to traditional convertible instruments, while maintaining the flexibility and alignment that make them an attractive financing tool in early-stage capital formation.

Across all regions, MZF PROTOCOL's venture debt vertical is built to capitalise on a structural shift in startup financing—where founders increasingly prioritise non-dilutive capital and investors seek yield without pure equity risk. By tokenising venture and convertible debt instruments, the protocol unlocks access to a previously restricted asset class, offering institutional-grade exposure to startups with verified equity backing and validated growth potential. MZF PROTOCOL’s protocol-enabled approach brings added transparency and efficiency to this historically opaque market, opening access to a broader investor base while supporting real-world innovation.