Companies offering climate-related technology are expected to garner the same attention from financiers as technology companies have enjoyed
Software and technology enabled businesses were considered risky by debt finance providers a mere decade ago as “classic companies” still dominated the landscape and the perceived threat to disruption from “known unknowns” was almost impossible to predict.
Given the broad nature of technology it is hard to point to a robust figure for how much technology lending has grown over the past decade. However, using private equity transactions as a barometer, according to Bloomberg in 2021 $146bn of technology company buyouts were accomplished, compared with $42bn in 2011.
These dynamics have enhanced lender appetite for the technology sector, a viewpoint that has been further galvanised by the pivotal role technology played during the recent pandemic. Now t Debt financing typically lags equity financing as companies are created through risk capital before accessing any forms of debt finance. Companies harnessing renewable energy or electric energy to replace traditional fossil fuels and reduce carbon emissions or supporting clean water, environmentally friendly packaging, and the circular economy from fashion to electronics are all gaining momentum.
Today lenders are offering a wide range of hybrid financing solutions from warrant-based venture debt or convertible loan instruments to traditional term loan finance — determined by the financial and operational maturity levels of the potential borrower. Alongside attractive financial and commercial prospects, debt fundable companies also tend to have a few rounds of equity investment under their belts, a reasonable funding runway, a strong purpose driven founding team and preferably value add investors as shareholders.
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