On European venture debt in different market conditions with David Bateman, Managing Partner at Claret Capital Partners

From venture debt, to fundraising in different market conditions in an exciting conversation with a fund that has been through the dotcom bubble, the credit crunch and a global pandemic.

May 11, 2024

Transcript

Today, we have with us David Bateman, Managing Partner at Claret Capital Partners a growth capital fund based in the United Kingdom.

The venture capital fund has a total size of €297M with +€700M in AUM and focuses primarily on growth-stage and VC-backed deals with European companies that are typically post-Series B. As an investment thesis, they focus on technology and life science companies, and some of their most notable investments are in Abivax, Butternut Box, Holidu, and Veed.

David has more than 20 years of experience in technology lending and financing. Prior to the buyout of Claret Capital from Harbert Management Corporation, he and Johan Kampe had co-founded Harbert European Growth Capital.

From 2002-2011, David was with ETV Capital, one of the leading providers of European growth loans at the time, where he was responsible for originating and managing investments and served on the Board. Prior to ETV, David worked at Broadview International, where he spent 7 years originating and executing technology M&A and financing transactions.

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Chapters:

03:17 David's Journey into Venture Capital
05:37 The Role of Debt in Venture-Backed Businesses
07:19 Venture Debt's Unique Position in Europe
11:03 Optimal Timing for Venture Debt
12:05 Sector-Specific Strategies for Venture Debt
16:48 Key Players in the European Venture Debt Ecosystem
21:36 Understanding the Terms of Venture Debt Deals
27:26 Capital Return Timelines and LP Expectations
28:21 Venture Debt in Different Market Conditions
31:25 The European Venture Landscape
36:30 Building Relationships with VCs and Entrepreneurs
43:25 Learnings from the Latest Fundraising Round
48:30 Advice for Emerging VCs and Final Thoughts

✍️ Show notes

Deep-dive.

How does a non-AI entrepreneur raise money and develop their business in 2024 in Europe?
Dispersed nature of European entrepreneurial businesses.
Fundraising and development – using equity and using debt.
Exiting.

Shout-out.

My shout-out goes to Zobito.
They stick to the areas they know (focus on enterprise software), they do great diligence because they know the area and they are relentlessly constructive afterwards.

Biggest learnings from your last fundraising.

Debt LPs are different to equity LPs. Our LPs are focused on liquidity, cash yield and capital preservation and less focused on small variations in IRR.
Deployment and deals in the ground matter a lot. We have recently funded our billionth euro in deals. Consistent performance over a large volume is the name of the game for the LPs.
That being said, debt LPs also suffer from overindexing in private assets and need distributions to re-invest. But its not as acute as with equity.

Advice for 10 year younger self.

Watch what people do, not what they say
Always be growing and learning
Keep finding, recruiting and retaining good people.

Top tips for European VCs fundraising right now.

Our LPs are different to equity LPs so some of our learnings are not applicable. I think DPI is crucial in a world where paper valuations are volatile. So find liquidity where you can across the portfolio.
Long term oligopolies are very rare. Burning less is the right strategy most of the time, although not all the time.
Remember that we are handling the savings that other human beings worked for. Humility towards investors is crucial.

Counterintuitive thing learned in venture.

“be greedy when others are fearful and fearful when others are greedy”.
Buffett’s dictum. The bottom of the cycle is the best time, to invest, to hire, to build. Be straight, direct and efficient.

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