Super-charging growth in regional tech businesses

18-03-2024

Following the launch in February of Palatine’s new Growth Credit Fund, Ryan Sorby, who has joined as Partner and Head of North, outlines how the fund will bring a fresh approach and a unique focus on sustainability to the debt funding market.

The Growth Credit Fund has been raised to help super-charge growth in some outstanding Venture Capital-backed technology businesses located in the North, Midlands, East of England and South West.

Innovation is alive and kicking in these regions, but we know that some companies’ growth is being held back because there remains a shortage of debt funding for earlier stage, high growth businesses, particularly those around break even or just approaching profitability.

This situation has been exacerbated by the fact that some previously active players in the venture debt market have exited over the last 36 months.

The Growth Credit Strategy will address this disconnect with a regionally focused proposition. It means the fund can support management teams who may have gone through an equity fundraise already and want to scale, but do not want to surrender further equity.

Unfortunately, some management teams that have a proven business model and have good visibility on when the company is going to be profitable and cash generative are finding there are limited debt funding options available.

These companies would still be too early stage for a traditional lender, but the Growth Credit Strategy seeks to support what we consider to be an underserved section of the funding market.

So far, the reaction to the fund has been very enthusiastic, but there’s more work to do raise awareness to VC-backed businesses and the advisory community.

The ESG factor

Alongside our regional approach we will draw on the Palatine Group’s long-standing and deep experience in sustainable investing and adopt this in the Growth Credit Fund.

Companies are winning and losing business because of their sustainable credentials, and this is here to stay.

Palatine believes that having a proper ESG strategy is not just the right thing to do, but genuinely adds significant value to a business. So, the strategy offers margin reductions to companies that are willing to embrace ESG in their operations.

“We’ll agree ESG milestones with the management team – for example to reduce the company’s carbon footprint or improve the diversity of the workforce – if these are met, the cost of funding is reduced, delivering a genuine cash benefit to the business.

We are obviously incredibly excited about bringing this significant and pioneering fund to market.

Important Notice: The fund mentioned within is only available to Professional Investors within the United Kingdom and Retail Investors may not rely on the information within. This is not an offer to sell, or an invitation for an offer to acquire, an interest in the Fund, nor is it an invitation to apply to participate in the Fund. This is not an offering or placement of interests in the Fund in any jurisdiction and should not be construed as such. No information in this document will form the basis of any contract.