In early April, the Swiss family office Cape Capital took part in a €25 million venture debt financing arrangement for Fairmat, a French company that specializes in recycling carbon-fiber composite materials. And family offices interested in accessing India’s consumer sector are using venture debt, said Sahil Aggarwal, director of the venture debt fund Trifecta Capital.
“Investors have been attracted to the space as they seek differentiated strategies with demonstrated performance that is less correlated to public markets and other private market strategies, said Andrew Kahn, co-founder and CEO of Partners for Growth, a global private credit firm. “Family office investors tend to be open to more esoteric strategies and seek to capitalize on market niches.”
Kahn, who has been structuring custom financing for technology companies for several decades, added that “venture debt and tech lending strategies can be a diversifying element to portfolios, give the secured credit nature of the funds and specialist focus on high growth companies.”
As a niche sector with limited competition, venture debt can boost risk-adjusted returns, said Marten Vading, managing director of BlackRock Growth Debt. “Compared to equity, growth and venture debt come with a host of features that offer more predictability of return,” Vading said. “They have a predetermined repayment schedule, clear security, amortization and priority in the capital structure.”
According to a recent BlackRock report: “There’s an abundance of high-quality companies actively in search of debt financing. They’re turning to a relatively small pool of qualified lenders who understand the intricacies of structuring these loans.”
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> Why venture debt deserves a place in family office portfolios
