Private Debt Europe

An Overview of Private Debt Europe

As mentioned in our article on private debt funds, we have built a trusted network of over 300 of the best private debt funds around the world. We have close working relationships with over 50 European private debt funds.

Both private debt and venture debt have seen an increase in utilisation in Europe. According to Preqin, funds raised for European private debt grew from US$8b in 2008 to US$57.8b in 2019. In the same period, venture debt has also grown from US$0.2b to US$1.4b.

The data provider further states that the opportunity set looks set to increase. Despite the seemingly attractive low interest rates in Europe, not many companies can access cheap funding, especially for fast-growing, small-mid size tech companies.

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This is because the January 2021 bank lending survey (BLS) from the European Central Bank reported more stringent credit underwriting standards, particularly for SME loans, and a rise in non-performing loans, with an increasing proportion of banks expecting further tightening of bank loans and lending activity.

According to Preqin, Venture capital (VC) activity has also increased alongside private credit and venture debt. VC equity investment in Europe has grown from US$6.4b in 2008 to US$42.0b in 2019 and has reached US$69.9b YTD 2021 (as of Aug). Since then, it's been on a downward spiral; however, private debt stepped up and is now shouldering a large part of the fundraising done in 2023.

There are several ways to calculate the venture debt opportunity in Europe. Typically, a private debt loan amount can be i) 25-30% of total equity raised; ii) 5x EBITDA or iii) 1.5x annual recurring revenue (ARR). If we were to use the first method, the market size of venture debt in Europe would be between US$17.5b to US$21.0b. In reality, however, we have been seeing fast-growing technology companies take on a private debt loan amount that is 5-15% of their total equity, and this works out to a US$3.5b-US$10.5b venture debt opportunity in the region.

As we discussed at length in other articles, venture debt can be used as growth capital, working capital, financing for mergers & acquisitions (M&A), bridging loans and for share buybacks.

Now that you have seen the growing venture capital and private debt ecosystem in Europe, two questions arise:

1) Which capital provider should your business talk to?

2) Do you know the local business culture?

If you’re unsure, we can help. Even if you know the established private debt providers (e.g. ICG, Alcentra, Hayfin, Arcmont, etc.) or venture debt providers (e.g. Kreos Capital, EIB, MCI Capital, etc.) in Europe, would you know who to reach out to or want to spend time reaching out to every manager? Few private debt funds in Europe lend to borrowers with less than US$5m in EBITDA.

As a debt advisory and brokerage established in 2013, we are heavily involved in the business community. Out of the 6,500 private debt funds globally, we have close working relationships with some of the most technology-savvy private debt lenders in the world and have helped over 450 technology businesses secure private debt solutions to support their growth.

This means that we are able to help you save precious time by quickly assessing who the best private lenders for your business are and who to reach out to, and we do so while keeping your business name anonymous.

Private lending funds like to work with us for the same reason – we save them a lot of time. We know what they want, what companies want and we help accelerate the matching process. We are able to do this as we are like an intelligence hub – we get inbound requests all the time, both from funds and from companies.

Our expertise as debt advisors and entrepreneurs allows us to evaluate your business model accurately, present a detailed case to our partners, structure a business acquisition loan around your needs and help you fight for the best loans terms.

Working with European private debt funds

Here's how Dott captured the attention of European private debt funds

Dott is a European micro-mobility start-up with a mission to free our cities with clean rides for everyone. Dott offers dockless shared electrical scooters and e-bikes as safe, convenient, affordable and sustainable alternatives for short-distance travel.

Founded in 2018, the company has 30k active e-scooters in 18 major European cities and is backed by major investors such as EQT Ventures, Prosus and Sofina.

Dott had several growth plans:

Expand in the UK, France and Spain
Working on a third generation of vehicles and plans to go multi-modal with the launch of e-bikes this Summer.
Expand its fleet of swappable battery scooters which bring huge cost benefits

Private Debt Europe