Any thoughts on comp at associate and senior levels? Would expect it to be higher than traditional direct lending. Key players post SVB seem to be Triple Point, Runway, Trinity, Hercules. Any info on culture of these shops and career flexibility / exits would be appreciated too.
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Have dealt with a few of these firms from the borrower side and understand the model pretty well. It’s an interesting sector and product, but not a seat I would want personally.
The names you listed are all funds—the other players in the space are banks. SVB is still writing term sheets, lots of smaller or regional banks are active (Stifel for example), and JPM is building out a VD team. Banks offer much better terms than funds—saw a bank TS recently priced at prime + 20 bps with 10 bps of warrants in the borrower whereas fund term sheets are often in the range of prime + 500-1000 bps with 50-100 bps of warrant coverage. Most of the funds are/have BDCs, so you can look at their loan portfolios—it’s usually a pretty motley crew of startups.
Underwriting in the space is…different. The VD line will usually be paid back using funds from the next equity fundraise (at which point lender often extends/upsizes instead), so a lot of the diligence is really on who the VCs are and if they are committed to investing in the next round. Company financials and business model are obviously diligenced as well, but there’s not exactly a lot of modeling going on during underwriting—they’re largely piggybacking on the VCs diligence.
One interesting adjacent trend right now is the rise of tech debt and structured equity funds launched by some of the MFs and crossover equity investors. They are focused on unicorns for now, writing checks that are much bigger than what VD funds can do. Will be interesting to see if any eventually go down market and squeeze the traditional VD lenders.
Thanks, Sbed. If you have any insight on the comp & culture of these firms would be great. Also what are typical exits? Structured equity & the tech lending group of PC shops?
Not really sure on these points given I’m on the other side of the table. Culture is firm dependent as always. These are fairly small funds so comp isn’t gonna be fantastic at junior levels.
I’ve seen more senior guys move to opportunistic funds with a broader mandate, but likely harder to do at the associate level—you’re not getting strong underwriting reps in. As with most buyside roles, this is the exit opp for most people.
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