Growth credit - the quiet revolution in funding
From Palatine's £75m fundraise to a deal to back a cyber security growth story
Hello Rainmakers,
When we set out on this adventure we wanted to give advisers, funder, business owners and the professionally curious (that’s you, Rainmakers!) some insights into a changing landscape.
This can be as a result of the deals - what they say, what they represent - but also the nature of the funding ecosystem and how new things emerge.
Today we bring you a piece that’s been a few months in the making, as I’ve tried to get my head around the concept of Growth Credit.
Ryan Sorby of Palatine has been patient with us, and what started as a concept is now a reality as a flurry of deals got over the line in the last part of 2024.
A quiet revolution in the corporate finance lending space is whirling through the UK.
The idea of Venture Debt, or Growth Credit, was considered a US thing. A tool of Silicon Valley venture funders looking to keep the lights on with additional rounds of non-equity funding, which won’t trigger a revaluation of an investment.
But according to Pitchbook, venture debt continues to grow in Europe as fast growing companies look for cheaper financing.
In a report with JP Morgan they reckon venture debt has provided €13.2 billion of capital year to date (YTD), already at the full-year total for 2023.
However, the largest venture debt deal of the year isn’t exactly a poster child for the emerging financing sector - shortly after Swedish battery maker Northvolt’s $5 billion deal, backed by European Investment Bank and the Nordic Investment Bank, it filed for Chapter 11 bankruptcy protection.
A slightly happier example is London-based fintech company SumUp which raised €1.5 billion to push out its fast growing card reader business, which is now being touted as a big IPO in early 2025.
But closer to home, one of the pioneers of venture debt in the UK regions is Manchester-based Palatine.
Their Palatine Growth Credit Fund is aimed at backing high-growth technology companies in the UK regions, and reached a first close at £75m and appointed experienced venture debt professional Ryan Sorby (second right) as partner to run the business alongside partner Will Chappel.
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