StartUp City Interview with Brian Geraghty, Principal at Claret Capital Partners.
Brian joined Claret Capital Partners in 2023 as a Principal in the Investment team. Here, he speaks to StartUp City about his role at Claret, venture debt as a growth funding option, the impact of technology on the industry, and his advice for those looking to move into a similar career.
What is your current role, and what factors influenced your decision to pursue a career in venture debt with Claret?
In my role as Principal, responsibilities encompass all aspects of the investment process, including origination, underwriting, due diligence, deal execution, and portfolio management.
I’ve always been interested in technology, and when I started in banking, I figured out quickly that lending, and supporting fast growing companies was one of the most interesting places to be in finance.
Claret itself is a very entrepreneurial business, and I’m excited to have joined the team as the company is scaling up and in the middle of deploying its third fund. Claret has deep relationships with LPs, VCs and entrepreneurs across the whole European ecosystem, and when joining I knew I could learn a lot from the whole team. It’s also a very busy and interesting time in the venture market right now.
In recent years, the business landscape has seen significant disruption. What are the challenges faced by startup companies in their day-to-day operations and during their initial phases of business?
The current market presents lots of challenges for companies. Rising interest rates and difficulties in accessing capital have added to this. Consumer confidence has decreased, leading to changes in buying habits. Consequently, many companies are faced with the task of re-evaluating their strategies and shifting to more profitable growth whilst trying to remain competitive in this environment. Regrettably, not all companies will emerge successfully from these circumstances. Understanding cost structures and workforce requirements has been critical to this, and we have seen a lot of startups having to implement workforce reductions, which can impact company culture.
In this market, resilience and efficiency are essential for companies to navigate successfully. It is crucial to assess the present situation and align actions with the overall vision for the business. Tough decisions have already been made, and there may be more ahead.
The market is under pressure, and we remain actively engaged, completing three to four deals each month across various sectors and geographic regions, primarily in Europe and partly in Singapore. Our goal is to back the right companies that are doing something unique in their field.
Additionally, we are committed to supporting our 80 plus existing portfolio companies as they navigate through this challenging environment.
What specific factors should entrepreneurs consider when deciding on venture debt in the current market environment?
In this market its tougher and more expensive to raise capital, specifically equity. Venture debt usually supplements equity, especially if the company is still loss making. It is typically used to get you to the next equity round, or more often than not in this market, to get you to profitability. Also, a lot of our portfolio companies have used debt to fund acquisitions, and we are seeing a lot of these types of deals in this market.
Businesses are now much more efficient than they were a couple of years ago and that can make it a better credit from a lending perspective.
Our venture debt product is intended for supporting growth, not for ensuring survival. In the current market, we observe many companies experiencing stagnant or declining revenues quarter over quarter or year over year – for such businesses, seeking capital, especially in the form of venture debt, is not suitable.
How will technology impact venture debt?
There is significant potential for advancements in technology within the venture debt and venture capital world. One of the most prominent areas is the rise of AI. This technology could play a pivotal role in enhancing our efficiency in tasks like screening companies, conducting underwriting and due diligence processes, and streamlining legal procedures.
We are also interested in further developments in smart contracts and blockchain technology. Once these breakthroughs occur, they have the potential to significantly enhance the security aspects of lending, which is crucial in our line of work.
Moreover, adopting a data analytical approach and leveraging AI in our assessments of businesses will be important as we scale. However, ultimately, both venture capital and venture debt are people-oriented businesses. Understanding entrepreneurs’ aspirations and objectives often goes beyond what data analysis can reveal. Therefore, we remain committed to maintaining a balanced focus, placing qualitative assessment alongside quantitative analysis in our industry practices.
Could you share some advice for those seeking a career in venture debt or venture capital?
Yes, venture debt and venture capital are interconnected industries, and my advice would be to focus on building a strong network. The venture capital world heavily relies on relationships, and your network is instrumental in generating deal flow. Starting early in your career to establish and nurture connections is crucial. The analysts and associates of today will become the partners of firms tomorrow, which emphasizes the significance of networking from an entry-level position.
For our firm, collaborating with venture capitalists is key to our business, as they often introduce us to potential investment opportunities. Regardless of your career stage, maintaining a genuine interest in the industry is essential. Never hesitate to express your thoughts and insights, as you might possess valuable knowledge about a specific sector or customer group that others might not be aware of. Having a well-formed opinion is important, but it’s equally crucial to keep an open mind and remain eager to learn.
At Claret, we are always looking for the best people who can add to the team, so feel free to reach out if you think venture debt is for you.
“Focus on building a strong network. The venture capital world heavily relies on relationships, and your network is instrumental in generating deal flow.”
Brian Geraghty, Principal