How to hack venture capital, with Fatou Diagne

Fund Shack

Fatou Diagne is co-founder of Bootstrap Europe, which acquired the German portfolio of Silicon Valley Bank in 2023. She provides a fascinating insight into the elite world of lending to the top tier of venture-backed businesses. Venture debt might not have the brand-pizazz of its equity cousin, but from a risk/return perspective it ticks all the boxes.

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This episode also features our supporters, RW Blears, a UK law firm specialising in fund management. If you are a UK venture capital manager or growth investor and need a trusted legal adviser visit RW Blears

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Ross Butler interviews Fatou Diagne, co-founder of Bootstrap Europe. Fatou offers a compelling look into the world of venture debt, focusing on its role in funding high-growth technology businesses and its strategic advantages compared to traditional equity financing.

Introduction to Venture Debt: Fatou Diagne explains that Bootstrap Europe provides debt funding to technology companies that have already received substantial equity investment. These companies are usually 5 to 7 years old, generating revenues of 5 to 20 million euros, and are backed by top-tier venture capital funds.

Target Companies: Bootstrap Europe targets mature technology companies that have a proven growth formula but prefer not to dilute their equity further. The firm focuses on sectors like semiconductors, life sciences, and energy transition, seeking to support technologies that can significantly impact society.

Venture Debt is way cooler than you think! Fatou clarifies that venture debt is often misunderstood. It is not a last resort for companies that cannot raise equity; instead, it is a strategic choice for well-capitalized companies looking to accelerate growth without further dilution.

Deal Flow and Timing: Bootstrap Europe follows potential investment opportunities for several years, waiting for the right inflection point to provide growth debt. The firm typically invests after one or two rounds of equity funding, although this can vary.

Benefits for Companies: The main advantage for companies using venture debt is the avoidance of dilution. Founders and early-stage investors can maintain larger stakes in the company, enhancing their returns upon exit.

Terms of Venture Debt: The terms are transparent, with interest rates typically around 8-10% over the base rate. The debt is repaid over 3-4 years, with monthly payments of interest and principal.

Bootstrap Europe’s Approach: The firm emphasizes a strong relationship with portfolio companies, focusing on providing support during both good and challenging times. They prefer to work closely with management teams to navigate growth and financing challenges.

Acquisition of Silicon Valley Bank's German Portfolio: In 2023, Bootstrap Europe acquired the German portfolio of SVB. Fatou discusses the strategic and operational steps taken to complete this acquisition, emphasizing the importance of speed and expertise.

Current Market Conditions: Fatou comments on the impact of global economic challenges on the tech sector, noting that while the market has cooled, there are still many high-quality investment opportunities. She highlights the importance of well-capitalized companies that can navigate difficult conditions to gain market share.

Future Growth & Challenges: The discussion touches on the growth potential of venture debt in Europe and the challenges of increasing market penetration. Fatou believes that with more education and understanding, venture debt can become a more prominent part of the funding landscape.

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#venturecapital #privateequity #techfunding #growthcapital #venturedept #debtfinancing #innovationtechnology #techinvesting #podcast #BusinessPodcast #FinancePodcast #Entrepreneurship

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