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The Scaleup Funding Market: The last 10 years

Throughout his career, Maarten van den Belt, working from Ruffena’s Amsterdam office, has dealt with various kinds of financial markets in different locations. Starting his financial career at a predecessor of  ING Bank in 1985, Maarten joined Ruffena Capital in 2018. In this article, he outlines his key observations of the Scaleup funding market (Series A and beyond), over the last 10 years.

  1. Equity funding for Scaleups was freely available over the last 5-6 years, with growth being the main determining factor to attract funding. However, since 2022, equity has become an increasingly scarce resource, and nowadays the main metric looked at is how quickly a Scaleup is cash flow positive.
  2. For debt funding, traditional banks have further retreated and made way for specialised private debt funds. This is a fragmented and often untransparent market.
  1. Many of these funds are highly specialised and have an almost fully automated credit risk assessment and monitoring. Online tools like algo lending, Generative AI and Open Banking tools lower operational risks. Smaller credits (up to GBP/EUR  100K) can be fully automated, whilst larger lending tickets still need manual intervention.
  1. Lots of these new debt funds are backed by international institutional investors like pension funds and insurance companies.
  1. Public data on what happens in cases of default is not available. Will there be a restructuring of the lending facility or will the borrower be forced by its lender to close down? Another issue is availability of staff who are equipped to deal with work out situations. There is a severe shortage of the right specialists.
  1. The pain of loan defaults will no longer be concentrated on bank balance sheets, but divided more evenly over those institutional investors who may be located in a very different location than a traditional local bank.
  1. IPO markets seem all the time to be on the horizon, but so far have not really materialised. In the current economic climate it is still unclear when they will reopen.
  1. Good teams at businesses with defensibility are still attracting funding from dedicated investors.