Hambro Perks holds first close for debut venture debt fund

Active discussions with LPs (beyond the vehicle's anchor investors) began in March 2022, David Hayers, head of growth debt at Hambro Perks, told Unquote. Hayers leads the firm's Growth Debt division and joined the firm in 2021 from Virgin Money, bringing a team with him to execute the strategy.

The vehicle has raised more than half of its target and has a hard-cap of GBP 125m, he said, adding that the fund is expecting a H1 2023 final close and could also hold a further interim close.

Macfarlanes provided legal advice on the fund.

The GP views venture debt as an underserved market in the UK and Europe, describing the strategy as "a good hedge against inflation and the more cautious equity investment environment" in a press release.

"There is now an increased awareness and understanding of this type of lending, but it was not very well-known at all when I started doing it nine years ago," Hayers told Unquote. "As the market in the UK continues to grow for this type of lending, we're seeing the current environment as a great time for companies to access this. At this time, equity is harder to come by and is more expensive. When companies are still in their growth phase and have not yet got to the inflection point of cash generation and breakeven, they have three options: to invest less and grow slower; to raise equity, which is challenging right now; or they look at potentially raising some debt."

Investors
British Business Investments and Phoenix Group are the fund's anchor investors. Foresters Friendly Society, family offices and high net worth individuals have also committed to the fund, according to the press release.

"One of the attractions in coming to Hambro Perks for me was the breadth and depth in their high net worth base, so a lot of people who have invested in the fund are people they knew very well and have one to one relationships with," Hayers said. "Other investors came through private wealth management platforms, and on top of that, we have institutionals."

As the fundraise continues, Hambro Perks is expecting that the next LPs to join the fund will largely be primarily UK-based institutional investors, with some from Europe, Hayers told Unquote. However, the firm will also welcome further high net worth individuals, he added.

"Our history and track record as a team has been primarily lending to companies outside London, across the country – it chimes with a lot of the institutional investors who are also helping to support SMEs right around the UK," Hayers said.

Investments
The fund will provide venture debt in the form of amortising term loans, taking senior secured positions, Hayers said. The vehicle plans to back UK and European high growth, B2B SaaS and patented hardware scale-ups, providing them with non-dilutive growth capital of GBP 1.5m-10m, with an average ticket of GBP 1m-5m.

"This is a fascinating space and the UK is really good at this – we have some genuinely world-leading technology, and we're focusing on parts of the market that have previously been overlooked," Hayers said.

"For us to invest, companies need to have an element of IP; and they need to be post-revenues, with a commercialised product or service," he added. "They need to have already raised equity from VCs, family offices or high net worth individuals, while still being in their growth stage, meaning that their cost base outweighs their revenue. Within 12-24 months, they will have cash generation and profitability."

The vehicle has not yet announced its first investment but expects to back around 40 companies in total, Hayers said. It will not invest in companies that are already in Hambro Perks' portfolio, he added.

The firm will be mindful of the current exit and valuation environment when making investment decisions, Hayers told Unquote. "We've seen valuations come off a little bit over the last year or so, and we're taking note of this," he said. "We're focusing on the financial strength of the companies we invest in. We do take note of the current equity raised and the valuation, but we are trying to lend to companies with a high growth base, and as they continue to grow at pace, we'd expect them to exit for strong valuations in due course, as and when management and existing investors are ready to realise their existing investments."

People
Hambro Perks – David Hayers (head of growth debt); Dominic Perks (co-founder, chief executive).

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