Unlike classic corporate credit, tech lending requires specialist expertise. Opportunities are often complex, highly bespoke, and outside the reach of traditional banks. Investors typically access this segment through niche private credit managers (GPs) with deep sector knowledge, structuring skills, and active monitoring capabilities.
Who are the key players ?
- Specialized private credit managers: Boutiques focused solely on technology, venture debt, or asset-backed lending.
- Diversified alternative managers: Large platforms adding tech lending sleeves to complement private equity or growth equity strategies.
- Hybrid managers: Teams at the intersection of credit and venture capital, leveraging relationships in the start-up ecosystem to source proprietary deals.
These GPs are the gateways to the opportunity set, as direct access for investors is limited without specialized networks and underwriting capabilities.
A Market in Strong Growth
The tech lending market has expanded significantly over the last five years, driven by:
- The withdrawal of banks from lending to high-growth, cashflow-negative tech firms due to regulation and risk appetite.
- The explosive growth of the tech sector, from SaaS to digital infrastructure, creating demand for flexible non-dilutive capital.
- A shift from equity to debt solutions, as founders and VCs seek to reduce dilution in later funding rounds.
Estimates suggest the venture and growth debt segment has doubled globally in volume over the past 5–7 years, with North America leading, Europe catching up quickly, and Asia beginning to scale.
Why It’s an Investor’s Market
Despite strong growth, the market remains underserved by capital:
- Demand for non-dilutive financing outstrips the supply of specialized lenders.
- Many GPs report robust pipelines of opportunities, but limited fund size constrains deployment.
- This imbalance creates favorable conditions for investors, who can expect:
- Favorable pricing (higher spreads, fees)
- Tighter covenant packages
- Strong negotiating power on terms and collateral
In short, the gap between opportunities and available capital makes tech lending a buyer’s market for investors.
Benefits for Investors
- Short Duration
Loans maturing in 12–36 months, enabling faster capital recycling. - Interesting Yields
Floating-rate coupons, upfront fees, and sometimes equity participation. - Downside Protection
Collateral pledges, covenants, and rigorous monitoring. - Diversification
Low correlation with traditional equity and fixed income. - Real Economy Impact
Financing innovative companies critical to the digital economy.
Conclusion
Tech lending is no longer a niche. It is evolving into a core component of modern private credit portfolios, delivering yield, diversification, and resilience. But to access the opportunity, investors must partner with specialized managers capable of navigating complex assets and structuring robust protections.
With the market expanding and demand far outpacing capital supply, investors today hold the upper hand, positioning tech lending as an opportunity in private markets.
Disclaimer
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