Navigating the Funding Landscape

VC vs. Debt Financing Explained

Gain insights into capital raising and alternative funding strategies that are shaping the future of PropTech and FinTech, with insights from:

- Garry Williams, Director of Engagement at Tractor Ventures

- Claire Thompson, Partner & Co-Head of VC at Herbert Smith Freehills

- Tom Ellis, EIR at REACH / Second Century Ventures

Capital raising and funding strategies are rapidly evolving in the PropTech and FinTech sectors, driven by innovative approaches and diverse funding sources. A recent panel discussion featuring industry leaders Garry Williams, Claire Thompson, and Tom Ellis, hosted by Mike Bird, provided valuable insights into these trends.

Leveraging Debt in Tech Funding

Garry Williams, Director of Engagement at Tractor Ventures, highlighted the increasing use of debt funding in the tech sector. Traditionally, debt funding has been underutilised, with a common misconception that it doesn’t fit well with tech companies. However, Williams noted that in markets like the US and Europe, 17-20% of venture capital (VC) deals in 2021 included debt alongside equity. Tractor Ventures has funded over 180 companies with $75-$80 million, focusing on revenue-generating companies with sustainable practices. Williams emphasised that debt and venture capital serve different purposes, and founders are becoming more educated on how to effectively utilise both.

The Role of Venture Capital

Claire Thompson, Partner & Co-Head of VC at Herbert Smith Freehills, discussed the firm's comprehensive services for founders, from early-stage capital raising to IPOs and M&As. Thompson pointed out a two-speed market: AI-enabled companies find it easier to raise capital, while others struggle. She mentioned that some founders resort to friends and family rounds when traditional funding proves challenging. For later-stage companies, secondary transactions and mergers are becoming more common as employees seek liquidity.

Trends in PropTech and FinTech

Tom Ellis, Entrepreneur in Residence at REACH / Second Century Ventures, shared insights on the PropTech and FinTech ecosystems. He highlighted a shift towards profitability and sustainable growth, noting that investors are now more diligent about the journey and narrative of potential investments. Ellis underscored the importance of companies being either fundable or profitable, or having a clear path to profitability. He also mentioned significant themes such as sustainability, clean energy, community-focused solutions, and security within the PropTech space.

Case Studies and Success Stories

The panelists shared several success stories to illustrate their points. Williams talked about how Tractor Ventures supports companies like SignOnSite, a PropTech company using SaaS solutions. Ellis mentioned Sensor Global, a startup developing remote-monitored smoke alarms, which successfully raised a Series A round and is leveraging debt for inventory finance. These examples highlight how diverse funding strategies can drive growth and innovation in PropTech and FinTech.

The Future of Capital Raising

The discussion concluded with a consensus that it's always a good time to start a company, provided the idea addresses a significant market need and the founder has the drive to succeed. The panelists encouraged entrepreneurs to explore various funding options, leverage new technologies, and focus on solving big problems in the market.

This panel discussion underscores the dynamic nature of capital raising and funding strategies in PropTech and FinTech. By embracing both debt and equity funding, and focusing on sustainable and community-driven solutions, companies can navigate the complexities of growth and innovation in these evolving sectors.