Hambro Perks


Raising a first-time private capital fund in a volatile environment

Raising a first-time private capital fund in a volatile environment

Shaun Beaney, Editor of Preqin First Close, interviewed David Hayers, about Hambro Perks’ newest fund. Read the full interview here.

This may not seem like the ideal time to raise a debut fund, but Hambro Perks’ David Hayers has been doing just that, to the tune of £100mn. How? Why now? And what next?

Raising a first-time fund isn’t an easy task. While many first-timers in alternative assets have been successful, many others have tried and failed. Then there’s the small matter of finding good assets and managing your shiny new vehicle profitably, for you and your investors.

Some risk-off institutions won’t back first-times funds, but other LPs may be attracted to a manager’s strategy, market niche, or entrepreneurial energy. In some cases, the new fund could be driven by talented individuals who’ve come from businesses and professions outside alternative assets.

Slowing down

In private debt, for example an average of 50 first-time funds have been raised per year in the last decade, typically in the range between $200mn and $400mn per fund. That said, the pace slackened in 2021 and 2022, according to Preqin data.

As a subset of this, an annual average of only 13 venture debt funds have been raised around the world in the past decade, at an aggregate mean total of $1.6bn, so there’s plenty of scope for expansion. But how tough is it to close your first fund? And what can we learn from those who’ve already done it?

We spoke with David Hayers, Managing Director at Hambro Perks, a London based firm that recently announced the £100mn Hambro Perks Growth Debt Fund.

Why has Hambro Perks decided to raise its first Venture debt fund?

It’s a multi-strategy investment firm with equity funds across a range of stages, strategies and stakes in about 140 technology companies. The firm was being approached by an increasing number of these companies asking for venture debt, although we’ll not be lending to companies in which Hambro Perks has a stake, those conversations helped clarify the significant opportunity in this market.

Is there a market gap?

The prevalence of venture debt in the UK and Europe is some way behind North America, so the opportunity to grow it as a proportion of overall venture investing is every exciting. Over time, the intention is to deliver multi-franchise private-debt fund strategy.

How’s the new vehicle structured?

It’s a seven-year, closed-end fund with a target size of £100mn by mid-2023. We’ve delivered a very strong first close and have considerable financial firepower that we’ve now started to deploy.

What loans are you making?

We’re able to lend between £1.5mn and £10mn to UK and European companies. We focus on software, primarily business-to-business (B2B) software as a service (SaaS), and a patented hardware, and advanced manufacturing. The venture debt team at Hambro Perks all worked together in the venture debt team I previously ran at a UK bank. These are the sectors to which the team’s been lending for close to a decade.

The majority of the companies to which we lend are still loss-making, so having our loans underpinned by highly visible recurring revenue (in the case of SaaS-based companies) or patent-based intellectual property is strategically important.

Who’s invested in the new fund?

We’ve attracted a diverse group of institutions, family office, and high-net-worth investors. Disclosed investors include the British Business Bank, Phoenix Group, and Foresters Friendly Society.

These investors liked our differentiated offering, the strong financial returns we’ve consistently generated in our previous roles, and the fact we’re a fully formed team who’ve been working together for many years. They also appreciated that we’ve got a long track record of lending to companies across the UK.

Has it been particularly difficult to raise money in the past year?

Most of our investors are UK-based. Some foreign investors were uncertain about investing here given the political backdrop through the summer and early autumn of 2022.

But the impact of the economic conditions has been more nuanced. Companies are more focused on reaching breakeven and growing more sustainably, than on raising regular and increasing rounds of equity. This, combined with the fact equity is more expensive and harder to raise, means that our pipeline of opportunities is richer and deeper than we’d have expected at this point in the fund’s life.

What were the attractions of your investors to a first-time fund?

A number of potential investors viewed us as first-time fund and had internal restrictions preventing them from committing capital. The relatively small £100mn target also excluded a significant chunk of the institutional investor base.

Plenty of others were attracted because our team had worked together for a number of years and had a long track record of investing in what is a nascent and fast-growing market. Allied to this was Hambro Perks’ reputation as a well-established and highly respected investor in innovative companies.

What lessons did you learn?

It was a more intense process than we’d anticipated. Regular communication with potential investors was essential, particularly as the geopolitical and macroeconomic environments remained volatile in the run-up to our first close. This meant we were meeting potential investors more often than would otherwise have been the case.

At each subsequent meeting, it was important to demonstrate the progress we’re making in terms of fundraising, fund establishment, team onboarding, and pipeline build. As a result, we were able to give potential investors the confidence that we were delivering exactly what we said we would, if anything, the changing macro environment increased our opportunity set.

Hambro Perks also has a dedicated fundraising team, which was essential in delivering our strong first close.