David Bateman, Managing Partner @ Claret Capital Partners

David Bateman is a Managing Partner at Claret Capital Partners.

The Claret team has been active in the technology financing markets for over 20 years and provides debt solutions to help entrepreneurs and private equity investors grow their companies while minimizing dilution. Since 2013 Claret has backed over 140 European SMEs from a wide range of geographies across Europe.

David joins James Pringle to talk about the company profile they prefer to back, what success looks like for a venture fund, the biggest misconception about venture debt, & so much more. 

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Transcript

0:00

Welcome to the riding unicorns podcast. This is the podcast all about uncovering what it takes to build a unicorn business. On James Pringle. I'm a VC at portfolio ventures. My co-host is Hector Mason. Hector is a B2B investor at episode one ventures.

James 0:19

Hi David, welcome to the Riding Unicorns podcast. It's great to have you on. Maybe we could just start with a quick intro to yourself and Claret Capital Partners.

David 0:30

Thanks, James. And thanks very much for having having me on very happy to be here. So, my name is David Bateman. I've one of the co managing partners and founders of Claret Capital Partners. We the investment advisor to the Capital Funds at the same structure as many other sort of and we run what is basically one of the larger specialty financing firms across Europe for pan European technology businesses. My co founder, the colleague and longtime colleague is old friend at this stage called Johan Kamp. And Johan and I would have started this business more than uh, 10 years ago, basically. We created Carrot out of a buyout from a U. S. asset manager that had backed us originally. And so Claret has been around as an independent firm for about three years.

James 1:21

Awesome. And so one of the pillars of this podcast is trying to educate and inspire entrepreneurs. And it's really important that we share different methods for funding one's business. could you explain the difference between the Claret Capital model and maybe a more traditional

David 1:39

VC model? Sure. So our investment strategy is Often labeled either venture debt or growth debt in the marketplace, and it is quite distinct, actually, from venture capital, although it depends on venture capital, and it depends crucially on what you talked about a second ago, which are the entrepreneurs themselves and the whole basis of our strategy is that there are times in the development of a technology or life science business, because we do life sciences as well, where a venture backed business should have access to capital other than just equity. To grow itself before it turns profitable. Obviously, we all hope that these businesses are going to grow up to be unicorns and to be giants and that they'll eventually turn profitable and turn into Cisco or turn into Facebook. But along the way, they have a lot of events where they need to raise capital. And the whole purpose of our strategy is selectively at points along that journey, we should be able to provide capital to these businesses. Which is not as diluted as equity. And that's the core of what we do. We basically provide a less diluted form of capital to that equity backed, VC backed technology and life science community. Yeah, that makes sense.

James 2:47

And, um, it's great to, you know, make entrepreneurs aware of those different options. So, if someone's listening, or, you know, what's the profile of company that you

David 2:58

like to back? the key question, I suppose, with always, is that our product is always timing. we are a situational strategy in the sense that almost all companies at some point in time will need to raise equity or will raise some equity. And it's very hard to start anything of, shall we say, serious value or serious interest in tech or life science without equity capital. Occasionally happens, but it's pretty tough to do. And so we make sense at certain moments in the lifespan of the business. The key thing is usually come in, in general, three to four years after a company is first founded. And the key aspects that you see is usually the companies are revenue generating. They have probably got product market fit. They should have at least stable margins, which hopefully are improving, and they should be growing their revenues quickly. Those are probably the key metrics that are need to be present for us to make sense. The downside with our product sometimes is it is debt, right? It is different to equity. It's very hard to damage a business putting equity in. You might damage the business with what you do with the equity, but you're not likely to actually make a business less secure by putting in equity capital. Debt, on the other hand, can be a negative for businesses if the debt service becomes a burden or becomes a problem. So this is why the timing and the selection of the scenarios under which people use our type of capital is so important. So the main thing that we actually spend our time doing as a team is trying to make sure that the situations we're coming into are the right situations from a maturity point of view, from a situational point of view, from the use of the capital point of view, and that we're not going to cause problems in the company.

James 4:38

And so one of the criticisms of venture capital is that sometimes you become misaligned between founder and VC with sort of maybe too much expectation or different time frames of success and things like that. What does success look like? To a venture debt fund because VC is obviously, you know, unicorn or bust basically is, power law returns from a few in your portfolio. What does success look like from a venture debt deal for you and the company?

David 5:11

So starting with the company, which is most important, the companies who use us. Are looking for a couple of things. First of all, they're used. They're looking for some form of substitution effect versus equity. at some point in the analysis, we should be allowing the company to either reduce its dependence on equity or in many cases, avoid an equity around that a point in time completely. So we're often used where you have a company. Let's say it has taken maybe one or two iterations to get the go to market, right? Okay. But now the go to market is really working, and we often come in at that stage, and we will simply provide effectively term loans are our core investment. I should say our core investment form is that we provide term loans, you know, with which are effectively covenant free, but which have got a fixed timeline for repayment, usually over 3 to 4 years. So the key thing that we do if we succeed is we time our deal. Thank you. So that the company can make use of the capital and get itself from value point A to value point B with a lot less dilution than if it used equity. Now, usually value point A and value point B are simply growth. I mean, that's the most common case. It's not always the case. if you think about life sciences businesses, sometimes it could be something slightly different. It could be regulatory approval. It could be progress in a drug. It could be a strategic partnership. It's not always revenue growth, but that's probably the most common thing that the companies are trying to achieve. They're trying to effectively grow themselves as fast as they can with minimizing the dilution along the way. And that's what success really looks like. For the company and the company can monetize that in a couple of ways they either raise around, 18, 24 months later at a much higher valuation, which is therefore much less dilutive to the original shareholders, or sometimes they get all the way to profitability or they get all the way to an exit. We probably put also about. 50 percent of our capital, but probably less than about 15 percent of our deals into acquisition finance. That's a significant component of our business where you might have a stage in a marketplace where, let's say, the venture capital firms have, they might have backed four or five players. And actually, it's becoming clearer who's actually got the better technology or who's got a lead on the others. And you'll often find the leaders will acquire the others. And we're often part of that picture where we're providing The capital to the leading companies to buy out, perhaps some of the other businesses in the space and do that and pay for those acquisitions again without having to raise equity to do it. That's another significant use of our capital, and that type of consolidation is also another. If you like to go back to your question, it's a win if you like for the venture backed company. What it looks like for us. I mean, we are structured like a classic, private equity fund. We have probably lower target returns than venture capital firms. So we raise our capital from a slightly different pool of LPs tends to be what you might call real money LPs. So we're really from a fundraising point of view, we're really part of the private debt market. And so those players are looking for high cash yields. They're not necessarily looking for 30 percent IRRs. And so from our point of view, what we want are a pool of loans with candidly as few losses as possible, although they happen. And ideally we get equity kickers in all of the deals we do. And those equity kickers form essentially a pool of additional return. And if we have done our job well, and we have selected well within the opportunities that are presented to us, then those equity kickers should represent a substantial bonus to us. And that is a major driver of the carried interest to the team. Right, okay.

James 8:59

And Interest rates have quite a big impact on the venture capital world, because as they go up, maybe LPs turn their attention to other assets, and so there's generally less money within the venture ecosystem. how does a higher interest rates impact a venture debt model?

David 9:15

in a whole range of ways, you're absolutely correct. they have a number of effects. so first of all, our rates, while our rates are not directly linked to bank or other rates, we don't raise our capital from the banking system. The way let's say, for example, Silicon Valley Bank might do, although their Silicon Valley Bank is a venture lender, uh, was anyway, and they did, they obviously. You know, raise money from from the banking system. But by and large funds like ourselves, we don't necessarily raise capital from that system. But nonetheless, it affects the rates at which we can lend. And so our rates have increased, not by as much as you might think because there's other factors kind of at play. But our interest rates do go up slightly. So there's that effect, but they don't affect They don't go up proportionally that much, right? Venture debt is already an expensive loan, right? It's already even before the current interest rate hikes, classic venture debt was going out at 10, maybe 11%. So to go from 10, 11 up to 13 is not the same as it would be on your mortgage, for example, going to three to six, right? So it doesn't have the same effect. That it has on other parts of finance but you're all, you're very right about the interest rates and their broader effect on technology. I mean, the bigger effect is it is interest rates that have probably affected investor perceptions of, tech valuations, tech valuations are volatile through time. I mean, I've been doing this business since the early 2000s. So I was doing this in 2001, 2002. And I can remember the. com bust and we were also doing it, my partner and I through 2008, 2009. And we're back a little bit in some of that territory. It's not exactly the same, but there's definitely some parallels. and a lot of that in this case is interest rates. They have obviously changed investor perceptions. In a whole range of areas in terms of how they view tech, particularly tech valuations. And so, they generate additional demand for venture debt, frankly, because we're a good anti dilution but we're an even better anti 2023. And that is probably the single biggest indirect effect of interest rates on the market. And they have had a very dramatic effect, I would say, in the last two years. From the point of view of the actual lending itself, it's actually not that big a feature uh, funny enough. it's more its effect on the broader market. And as you said earlier on actually the availability of venture capital which, you know, does appear to be pretty constrained at the moment. Yeah. And

James 11:43

as you said, it's kind of situational when these companies. Want to use venture debt and you know a lack of venture capital late stage funding may create more

David 11:53

situations It has another effect that we've observed also, which is kind of a behavioral effect which is that when equity is available in large amounts that You know, high valuations that influences CEO and founder behavior, you know, your, your business plan. if you're an entrepreneur and you've developed an innovation and you want to take that innovation to market and go and build a business, if equity is readily available, you will design a business plan that makes use of that equity. And you're be crazy not to, right. I mean, that's the right thing to do. To go back to your earlier question, you know, when does venture debt work? One of the areas that we're not that useful in is if the companies have very high burn. and sometimes high burn is the right strategy, right. In, in, you know, a lot of the best businesses were built. Very few really amazing businesses were built without some period of high burn, but in a time like this, when the interest rates go up and the availability capital changes, what happens in our market also is not only are people interested, perhaps because the dilution. is tougher on them because the valuations have fallen, but they also change the business plans, right? The business plans are designed differently and the entrepreneurs pursue less effectively, less capital hungry strategies. And that means that our addressable market in fact expands because more companies have got business plans that suit what we do. They're thinking about, going through the stages. They're not trying to do the big bang or the land grab as much because those are tough things to finance with debt. and they're tough things because of the volatility and the difficulty in prediction, if you're an entrepreneur and you're thinking about using venture debt, one of the questions to ask yourself is, is my next six to 12 months really that predictable? Because if it's highly volatile, my lender's going to have more difficulty with that than an equity investor. It's just harder for lenders to adapt, harder for them to process. The instrument is, and I'm fond of it, I've made my life around it, but the instrument is that bit less flexible. And so for an entrepreneur, there are, there are, you know, meaningful questions around this. What tools you use at what points in time. And it may well be that for the next 12 months. It's not the right tool, but it could easily be once your product is launched once you're, I guess your feedback loop from multiple customers is established, that's very often we do some semiconductor deals. And one of our questions is always look, you know, have you started to get repeat orders back? I mean you've taped out the product you've got it in the hands of the key people you're starting to get orders But have you got the repeat orders because that's when you know your forward forecast is reliable And that's the moment to use venture data. So those might help you in positioning it a bit

James 14:32

Yeah, is it also fair to say that having a predictable sort of ltv and cac is important because If, you know, over the last few years, we've seen social platforms kind of throttle organic reach and, expect brands to pay more for reach and change their sort of pricing slightly. And, Instagram's changed a lot. The whole DTC playbook has kind of unraveled slightly, uh, or at least, you know, brands have had to adapt to new ways of acquiring customers. So if those, if those customer acquisition costs. Creep up, can that sort

David 15:07

of, yeah, you're, you're, you're exactly right. I mean, that's exactly. So, you know, for example, if you have a business and we would have had a few that let's say has a media for equity deal and it's hard and it's genuinely difficult for the entrepreneur to judge this, right? If you've been given 15, 20 million in media for equity and you're spending it to build your business. You don't quite know what happens when you turn that tap off. And what is your LTV CAC? it's a genuine question, right? So, you're absolutely right. if those type of metrics, uh, LTV CAC is a good one in, for example, e commerce or in some software areas, you know, some sort of enterprise software or, you know, you know, lower ticket enterprise software spaces, if that is variable or volatile, Or you're not convinced you actually, you know, you're sure how it's playing. This is a feature. I don't want to give you the impression that you have to have every last bit of the model nailed down. You just need to know that you're not going to discover, you know, major interruptions in the next sort of, 12 months, nobody in an entrepreneurial business can tell you 24 months out but you need a bit of visibility in order to use the product successfully would be my view.

James 16:18

in the FinTech boom, sort of 2018, sort of 2021 sort of range, we saw a bunch of what I'm sort of now called revenue based finance. FinTechs pop up and some of them scaled very quickly, maybe arguably too quickly. And we've seen also some casualties off the back of that. What were you thinking when you saw all of these new kind of funding models appearing? How did you react to that as someone with as much experience and seeing as many cycles as you have?

David 16:50

so there's, I mean, there's definitely a role for them and they've been going, I mean, we would have first seen them emerge more than 10 years ago you know, in different spaces and people generally have used them in a couple of areas. They've been used quite a lot in e commerce businesses. They're also used quite a lot in some software businesses in different ways that the formulas and the metrics are applied in different ways. And they were a lot of them financed by banks you know, when interest rates were very low. But I mean, for a lot of companies, they work quite well are a form of competition. When we talk to our investors, they're up on our competitive chart. A number of them are pretty successful and pretty large. And I think it's depends on your business. if your business, again, the e commerce business is highly predictable then these tools can often work. They're also attractive to some companies in the sense that we often generally work with venture backed businesses, and we will usually not apply a lot in the way of covenants. So when we put capital into a business, the phrase we usually use is it spends like equity. We don't have a lot of covenants. We don't have a lot of constraints. And if they want to go and spend it on R and D or on salespeople or whatever, whatever's in the business plan, they can basically spend it on. The players you're talking about usually have much more defined uses of their money. So it's going very much into the working capital or it's going into the marketing. Some of these players would have models that, finance, you know, a set amount of SEO spend. For example, you see deals like that. And in the software side, you see a lot of these sort of ARR type facilities. you know, some of them provided by finance companies like you're describing, some of them provided by banks. Usually they come with a lot different strings. It is horses for courses, I mean, the market innovates. and you know, they'll, I know there have been some, some issues in some of the players, but I think that model is here to stay. and it may oscillate up and down. What's interesting is overwhelmingly a lot of these players are frankly leveraged. Behind the scenes, a lot of them are using bank lines. Those bank lines are going to reprice upwards. So it's a little bit of question of watch this space, I think, and maybe look again in 12 months time. But I don't expect it to um, you know, I, there's, there's nothing fundamentally wrong with it, or issues. It is, it is a more extreme version of what I was saying earlier about the entrepreneur's visibility, you know, to use those products, you really need, a lot of visibility and some people have it. So that's, that's a good product for them. Yeah, for sure. And so

James 19:19

it's worked this model for a number of companies and there are some sort of household names within your own portfolio that have. Grown into very large businesses. What's the biggest misconception about venture debt that you would like to dispel to anyone listening?

David 19:36

I mean, if we could, there's sometimes a perception that it's for the deals in the portfolio, you can't get financed with equity. And that certainly would have been maybe a bit of a perception around 2021 at various peaks in, in the venture space. Sometimes you, you hear that and, you know, effectively sort of the. You know, quote unquote, kind of, you know, some of the better deals will go to, you know, so they'll be reserved for equity players and the venture debt sometimes gets shown the rest of it. The reality is, is if you're an early stage investor in one of these companies and you can successfully use venture debt, it should result in lower dilution and better long term ownership. and those features are magnified if you put it into companies that are successful. So a lot of, as I mentioned earlier, a lot of our time is spent working out. Are we really looking at this business at the right time? We see an enormous amount of deal flow. And a lot of our time is spent trying to figure out, have we got the angle of approach right here? Do we and the investors? Are we on the same page? You made a comment earlier about sort of VCs and what they get criticized for. I mean, a key sort of softer element in all of this is governance. why is the company doing this? Is it doing it because there is a schism in the board? Is it doing it because there is an issue between founders and external investors, or is it doing it in fact, to maximize it, to maximize the returns for all the shareholders at a point in time, and we spent a lot of time in our deal discussions, trying to work that out. We don't always get it perfectly right. but it is something that we try and fix. And I think that's probably a variant on the misconception where, it goes in because things are difficult at the moment. It's being used a lot because the valuation perceptions of people investing and people seeking investment are. Out of alignment right now in a lot of cases. But to be honest, they're nearly always out of alignment. I mean, I've never met an entrepreneur who really thinks that the inbound term sheet really fairly values their business. I've never known an entrepreneur to actually say that. So there's always an effect in that, that's probably the bit that we spend a fair bit of time on. And that I suppose if we try and coach the market, although the market is bigger than us and we have to be humble and we can't. Presumed to do that would be to try and I suppose educate the market, educate the entrepreneurs and educate the board directors and say, look, this is when this product really makes sense for you. If you put it into weak situations, a lot of the time will make a weak situation worse, and that's probably not great for the company and not great necessarily for the relationships with all the players going on, because this is a repeat market. You know, we've been doing it for 20 years. And, you know, you know, it's you come across the same people all the time. Yeah, completely

James 22:24

makes sense. And I think we've had a few people from the crowdfunding space come on here and sort of say something similar, which is that they sometimes get tarnished with the brush of the companies that couldn't raise. You know, from institutional investors. Um, but actually we've seen that crowdfunding can be used really powerfully alongside institutional investors. And, you know, there are plenty of examples now and it has its own benefits, but with all of these things, it's, it's down to the right model for the right business in the right time, as you mentioned. So, um, they all need to be spoken about and have awareness around. So entrepreneurs can make the right decisions when looking at funding options. And so you, you, you've mentioned that you sort of sit alongside the VC industry. But you obviously are looking slightly from the outside in. So, I'm a VC, we are quite good at drinking our own Kool Aid. What does the VC industry get wrong? What would you comment from an outside perspective on where the VC makes

David 23:23

mistakes? Well, I suppose, there's a lot more VC now than there used to be, so it's not doing everything wrong, right? Even today, I mean, I, I know that the market is full of, perhaps somewhat negative stories and you, you receive the pitch book numbers. And I think depending on which data source you look at year over year, funding is down anywhere from 50 to 70%, depending on which quarter you take and which, how you slice your numbers. But if you look back a bit further, in time, it's only really down versus 2021 and 2022. If you look back to earlier years, VC funding, just if you just compare the numbers to three years ago, it looks pretty robust if you just compare the dollars. so I think. You know, kind of VC, perhaps the, whatever, the, the criticism or the, the, if you like, sort of the negativity that you hear is, is maybe, you know, it is, it is looking back just to 2021, right? I mean, you know, there was, there was a previous 15 year cycle before that. And the industry has grown tremendously and developed enormously in the last 20 years, and the people who are in VC, their profiles, their operating histories. all, hugely, I would say, sort of improved and developed over the last 15, 20 years in terms of the things that probably still sometimes are kind of recurrent. Issues that come up. I mean, I suppose kind of the same one. The main one is probably governance. I mean, you know, in a sense that and we don't have to worry about it. It's easier for us to say we are like what we say in Ireland. We call the hurler on the ditch. You know, the person at the side is criticizing, but if you have, you know, three or four investors in a company and they are trying to, agree the strategy for that company, And it's always going to be volatile in the company. It's always going to be a journey, and there's always going to be challenges. And you have a cycle as we're currently living through, it's navigating that governance issue. And you do get people sitting on boards and they're supposed to be there for the good of the company. It's clearly, you know, sort of the shareholder perspective in sometimes quite a narrow sense that's coming through. We would feel is kind of, you know, like that's actually bad for the company, I mean, that's, that's not good for the marketplace, not good for the company, probably in the long run, not good for your LPs. Although people know more about their LP situation than we do. Don't always know that data. But you do see a bit of that kind of behavior where, people have constraints in their own funds and those constraints get imposed on the business unnecessarily. That's probably the one thing that had the VCs do that. Maybe P doesn't do as much because usually it's one controlling shareholder. And so you don't have. Other shareholders who are, if you like taking the pain of that, whereas in a VC syndicate, if you have two firms that have no money and two firms that do the entrepreneur can be stuck in the middle, trying to raise around, trying to get something agreed. And it's very hard for them. And it's not really their fault. you know, they're just trying to run the business That's probably the main thing that you observe and it's a feature of the syndication landscape And also to a certain extent a feature of european fund sizes, You're more likely to have those challenges if the fund sizes are small than if the fund sizes are larger and therefore that's a bit of a feature of european deals yeah, and do you think

James 26:39

we might get better at that in europe as well because obviously even pre sort of 2008 2010. You know, there weren't really many unicorns at all in Europe. There were maybe three until 2010, something like that. So not many people had been on a unicorn journey and sort of really know what success looked like. Whereas now, 2021 I think there was three unicorns minted a day on average or something like that. So, so there's a lot more experience in the market. So do you think we'll start to see boards run in a better way with clearer alignment, clearer goal setting? Do you think we'll get better as an ecosystem

David 27:15

naturally? Absolutely. I think there's a natural process of maturation and there's a natural process of capital formation as well. I mean, I'm reading a book at the moment on the origins of the U. S. Venture capital industry, and you've got to remember that the U. S. Structures are built on, nearly 40 years now of successful and it isn't, you know, as people point out, you know, the I. R. R. S. Aren't necessarily, A lot higher. In fact, there's a lot of data that suggests the European system is reasonably capital efficient or possibly even more capital efficient. There's a big debate going on about that at the moment, but what the US has the advantage is it just has generations of capital formation in venture capital and technology, and that means you're going to have more larger funds. No matter what else happens, you're just going to have more of them. And a large driver of what I mentioned earlier is fun size. if you have a lot of people with 75 to a hundred million funds, the probability of reserve misallocation is just, you know, it's a very difficult multi-variate thing to get right. And if your fund is 175 to a hundred million, it's a difficult thing to get right. you're navigating a cycle. You're navigating multiple deals. You're trying to diversify and you're trying to follow your strategy that your LPs asked you to do. and you have to do multi jurisdiction. In Europe, a lot of people do multi jurisdiction as well, so it's easy to end up in these situations. But if your fund is 300 million. You're going to automatically have a lot fewer such situations. And so that, I think that process naturally helps deal with it. Yeah, interesting.

James 28:45

So David, we are going to switch tacks slightly and we're going to focus a little bit more on you as an individual rather than venture debt as a topic. the first thing I want to ask was really that throughout anyone's career, we all go through a period where something doesn't go right or something stressful. Are there any moments that you reflect on that you think sort of really helped shape you as a

David 29:09

businessman? Yes. I mean, I think in particular 2008, 2009, together with several partners, I spent seven years of my life building what was one of the first ever venture lenders in Europe, and we all as a team went into in a finance company structure. And we thought it was wonderful. We had access to bank leverage and uh, we were delighted with it. And then came a moment where we went to draw down our loan, the next tranche of our bank finance from an institution that was way, way larger than us and shall remain nameless to which they told us as we went in to send in, to put in the notice. Yeah, we, uh, we can't honor this, drawdown. And we're like, but you know, we can sue you. And I said, sure. You know, the queue starts there. No, we're not, we're not going to argue. Do you just have to join a bit of a queue? That's all folks. And I think, that taught myself and I mentioned my co managing partner, Johan earlier, that taught the two of us, to build an institutionally backed business and why is Claris on a private equity structure. Why have we gone down that path? multiple LPs, you don't have, you know, single points of failure, you can avoid these types of leverage situations and, and you see it, I mean, you know, we, we see it in Silicon Valley bank, which is a, you know, a colossus. So in fact, the largest player in our industry easily by a large chalk, uh, worldwide, and of course it has nothing to do with venture debt, but issues in the balance sheet, issues completely unrelated to the core business of lending, completely unrelated to the quality of what a lot of the people are doing on the ground and the institution is gone. So I think the main, one of the things that really marked us, I guess, is kind of just leverage, avoiding single points of failure. That's probably one of the biggest lessons I ever learned in business life. Yeah,

James 31:02

absolutely. And I was just coming into the working place in that environment. So it wasn't dealing with nearly as high stakes, but um, yeah, there's been

David 31:10

a no, I didn't, I didn't own much, but I still lost it.

James 31:15

Yeah. A number of stories from that on the podcast. Um, yeah, yeah. It's interesting. And there's always lessons to be learned. Right. So, um, so there's, there's positives to take away. so the next thing I was You might have answered it already, but um, who's the one person that's really had a big impact on your career?

David 31:35

like as an individual mentor or like a figure that you follow publicly or

James 31:41

as someone who, you know, personally, someone that you, you know, maybe a previous boss or a colleague or partner or someone that you work with that you've just sort of.

David 31:50

I would say probably I was, I was to say kind of the partners in broad view when I first came to London to work in tech finance and probably of that group, Victor Vasta, who was the managing partner in London for most of my time at that investment bank. So how I got into this business, this venture debt business originally was through investment banking. So my first, not quite my very first job, but pretty much my first serious job was in M and a for a tech boutique in London for a firm that is now part of Jeffrey's. It didn't quite get through 2001 unscathed. But that was a tremendous opportunity. With a U. S. Firm that was very deep in technology had committed to educating its people, growing its people and training them also letting them, try things on. Broadview was initially just an M and a advisor. And then it started to incubate venture capital firms. And actually, there's a fairly well known venture capital firm called Kennet Partners here in the UK, which is incubated inside Broadview. And that was really a really, interesting time, and it gave me an uh, exposure to venture capital from the inside. And I guess Viktor Bastov, that group, is probably one of the people who taught me the most kind of in my career, historically. And that led to venture debt. So, Broadview had a program, early when I started there, and this was also a little bit the story of the European tech market. Like when I started there in 95, almost all the clients were bootstrap companies because there was no venture capital. If you were going to build a tech company, you had to build it by using customers to finance you. So you had to bootstrap By the end of my time there, about 2002, the client was completely changed. It was a huge proportion of clients were actually venture backed or venture, or in fact, work for venture capital firms themselves, because the first ways of European VCs really start around 97, 98. And they became our repeat clients. And one of my last jobs at Broadview was running their VC relationship management program. And that's why the people who were setting up a venture debt business hired me, because they needed somebody who knew all the VCs in continental Europe, which was our client base at the time. So that had a huge impact on on me, and they were great. There was a recent reunion of Broadview in New York for the 50th founding anniversary of the founding of the firm, and I think somewhere close to a fifth of all the employees actually traveled to New York for the event which is quite a lot when you think about the fact the company hasn't existed independently for about 20 years. So tells you something about the nature of of the organization. Absolutely.

James 34:24

And I think it's always quite nice to reflect on people that have, supported or given you opportunities along the way. So, that's why

David 34:31

it's quite, yeah, no, there, there and there. And, and, and it's still a very, it's, it's still a very useful and friendly network. And supportive network. Yeah. That's great.

James 34:39

So David, we have two questions at the end of our podcast that we like to ask every guest. So the first one is if you could give three bits of advice. to anyone listening in roughly 60 seconds. What would they

David 34:54

be? So the number one thing I would say people is watch what people do, not what they say. That's what I tell everyone who works in our team. Second piece of advice is if possible, when you're looking at a situation, try to work out why, not just how, things are happening. It always helps. And you keep asking that question, it's a lot easier to find your way. And the last one is take time to smell the roses, life is short, actually people have all kinds of things happen to them. And if you can uh, you know, if you have success, you should take the time to enjoy it. And if you have relaxation and breaks, you should take the time to enjoy that. I remember going back to broad view when we were all going through a round of layoffs in 2001 and it sounds odd, but you know, one of the best bits of advice from one of the people, one of the managing partners was, you know, take the opportunity of a down cycle sometimes to just, relax, spend time with other things. Don't try and push too much because there is a cycle in life and usually the sun comes up in the morning. So those would be the three things I guess I'd, I'd say. Yeah.

James 36:04

Well, I think they're great bits of advice and um, yeah, it's, it's interesting about that down, down cycle one, because I think we all assume that you have to be on all the time and, um, It's not always the case. There are sprints within the marathon. So, yeah, I think that's really, really good advice. And so finally, David if you were to have dinner with any three people, who would they be?

David 36:29

So I got the chance to cheat on this cause you gave me a bit of advanced notice. So the first one, and this is investment driven is uh, Nassim Taleb. I don't know if you've read his book or his stuff on fragility or his stuff on randomness, but his book fooled by randomness. I thought was just brilliant and I watch a fair bit of YouTube and I think he'd actually be quite fun to have dinner with he's Lebanese, he's kind of a man of the world. I think that would be quite fun. The second person just for all of the whole financial shenanigans that he has come up with and has been able to watch where I think it would be just very funny to have dinner and actually he's on a book tour at the moment, but I probably won't get to it. It's Michael Lewis. I don't know if you followed his stuff or he's currently uh, if you see what he's writing about FTX at the moment, I don't know if you've seen that, but, uh, I think Michael Lewis would be, would be pretty entertaining to have dinner with. And the last person and this goes back, James, to what you were talking earlier before we started recording uh, would be Andy Farrell. he's somebody who has come out of the north of England from a very different background and has come over here to Ireland and been incredibly successful at motivating, you know, a team. which is still largely made up of Irish people, although there are a few, obviously, imports in there. And I think what he's managed to do in terms of the way he has blended the team, the people around him gotten them into a really, really good place. you know, uh, just mentally where they're enjoying what they do. They're doing it at a really, really high quality. He hasn't sacrificed anything for quality or performance, but he has clearly been able to do it without making anybody unhappy. And I always think that's a real, a real gift. And I run, you know, together with Johan, we run our own team. And if we could get even close to that, I think that would be an interesting dinner to find out just how exactly he does some of that, because it's not easy to keep those people happy and to keep them performing as well. So that would, those would be the three people for dinner. Yeah, 100%. And,

James 38:37

Maybe by the time this comes out, we might be talking about Ireland as Rugby World Cup winners, which would be, which would be great, I think we need a new Rugby World Cup

David 38:45

winner. I'm not sure you haven't seen it, but there's like, there's ads running here saying, don't jinx it. And they don't say anything else. They're just Brian O'Driscoll in the pub talking to himself saying, don't jinx it, don't jinx it, and they're going out, they're amongst the most common ads on Irish TV at the moment now, and so we don't want to jinx it, but who knows, but either way I think Andy Farrell, what he has done is incredible. You know, in terms of how you manage a team, how you keep people aligned, it's really exceptional what he's managed to do a hundred

James 39:19

percent. And um, no, the Irish team played amazing rugby and it's very interesting to see how well he's done. And, you know, it's super, super passionate rugby nation, but to galvanize everyone and line everyone is. It's really impressive. And then your other two guests also really, really interesting. And real sort of thinkers, aren't they? So, um, I'm sure there would be a really interesting discussion with both of them. And David, you've actually got three points for three original answers because we actually haven't had any of them before. so that's great. And yeah, I'm sure it would be really interesting to have a dinner like that. Well David, thank you so much for coming on. And teaching us a lot about venture debt and why it's an important part of the funding mix. It's really important for us to continue to educate and inspire entrepreneurs and show them different models. And Claret Capital, you know, is really,

David 40:10

I just want to stress one, one final thing, which is none of this works without the entrepreneurs. Like why do we exist at the end of the day? We have this relationship with VCs, et cetera. That's obviously a large piece of it. But at the end of the day, without the entrepreneur starting, none of this goes anywhere and they are the raw material that starts everything, basically. So I think, our model works if they are the ultimate beneficiaries. If those founders, at the end of the day, get to the finish line with, Effectively more of their company or further along or a bigger company. That's what it's all about. if we don't ultimately contribute to that, what, what, what is it about, I suppose is kind of the question, but yeah, thank you, James.

James 40:51

Yeah. And I think that is a great place to end because that aligns so well with what we're trying to do with riding unicorns. So it's really great. Well, thanks

David 40:59

so much, David. Thanks again. All right, James. Thank you. Cheers.

James Pringle 41:03

That's it for this week Thanks very much for listening To stay up to date with the latest episodes, please follow or subscribe on your favorite podcast platform We also have a newsletter called reading unicorns which is another great way to get every episode direct to your inbox Please tell your friends about it and engage with us on social media we'll see you on the next episode.