Talking tech: Atempo: bringing venture debt to Europe's tech market

Read time: 8 minutes

Atempo Growth is a new entrant to the UK and European venture debt market. Here co-founder and General Partner Jack Diamond and finance director Nick McCaul discuss how Venture Debt can support the European tech sector.

Atempo Growth is an independent venture debt manager founded in 2021. It aims to support high-growth European tech companies from Series A through to pre-IPO. These are typically high-growth/cash-burning, tech-enabled businesses looking for non-dilutive sources of finance that are overlooked by traditional lenders.

Based in London with a European focus and founded by a team with over 40 years’ of combined venture debt experience, Luca Colciago, Jack Diamond, and Matteo Avramov Giulivi, Atempo Growth launched its debut fund in January 2022. Atempo counts the British Business Bank, the European Investment Bank and Santander among its investors, among other institutional investors and entrepreneurs across Europe.

In this interview, co-founder Jack Diamond, and finance director Nick McCaul, formerly of Northzone, discuss their hopes for the company and how venture debt can be a valuable source of growth finance.

What is venture debt?

Venture debt can be used alongside or as an alternative to a venture capital round. It's far more flexible than traditional bank finance, which normally wouldn't be available to high-growth, cash-burning companies. Our transactions are tailored to a company’s needs and business models. We recently put together our own Guide to Venture Debt, you can find this here. 

Venture debt can extend the period between funding rounds, allowing founders and management teams to optimise valuation and is also commonly used to accelerate M&A or roll-up strategies. We recommend businesses raise growth debt before they need it! At the end of an equity round is usually when a company’s cash flow is at its strongest, thereby giving it better bargaining power when reaching out to raise funds. In addition, companies will be better placed for a venture debt due diligence process at this stage, as they will have all updated business information readily available, thereby streamlining the process. 

Venture debt lends itself very well to SaaS [software as a service] businesses with recurring revenue bases. We see ourselves as being able to expand these facilities, starting off with £2m to £3m and going all the way up to £25m plus.

Provided the core engine is working, we can grow with you over time. Ultimately, venture debt should drive higher valuations for your next round or drive you to profitability. It shouldn’t be used as a last resort.

If we do our job well, we can transition these companies through to traditional banking. 

Why is this model particularly suited to SaaS, and tech in general? 

As investors, we're sector agnostic. Technology can scale efficiently and if you have the right software – that scalability can be huge in terms of the product itself, as well as the breadth of distribution. 

SaaS companies tend to have contracted revenues which leads to predictability of revenue streams. They also tend to have higher margins and both of these factors make SaaS companies good candidates for venture debt. However, we don’t just look at SaaS companies and our team is experienced in tailoring our facilities to a variety of industry sectors and geographies, while supporting a broad range of use cases. Having completed over 150 transactions across 15+ jurisdictions across Europe, we find synergies with companies that share this pan-European ambition.

What has been your biggest achievement so far?

Our biggest success so far is building out one of the best-in-class teams, which has enabled us to invest into 16 top-tier technology companies across Europe. 

What characteristics are you looking for?

We want to see product-market fit and strong unit economics. Some of the models over the last few years focused purely on growth, even in situations where the scale needed for growth is enormous relative to risk, making it difficult for businesses to achieve profitability.  

A strong, resilient management team and board that is aligned, with a shared vision but also with an ability to adapt is key. We want to see that our debt can be accretive to the business to fuel the growth engine. 

Do you have a close relationship with the venture capital (VC) community?

Yes, we need to work closely with VCs in order to structure a debt facility that works for all stakeholders in the company. 

Most of our referrals come from VCs and from CFOs we've worked with before, as well as repeat entrepreneurs. 

Brokers and boutique investment banks offering referrals are now emerging in the European market, which historically wasn’t the case.  

What progress are you expecting in 2023?

We're in a good position from a portfolio management point of view. In terms of our market, we expect a renewed focus on capital efficiency - which is a good thing. We’ll likely see a renewed discipline on KPIs, maybe closer routes to profitability, and a consolidation of the market. 

Our focus is on companies with a proven market fit, strong unit economics and underlying profitability should the growth engine be switched off. 

If you're an early-stage business that ticks these boxes, now is a good time to go into the market for fundraising because a lot of noise will have been taken away from the market. There’s still a lot of capital out there. 

How do people get onto your list? 

We see venture debt as fuel for the growth engine, we look for companies that have got the engine working, along with a track record of investments and solid KPIs, then venture debt can accelerate a company’s growth trajectory. 

Do you get around the table with VCs and advisors, such as BDO, and look at where venture debt will play a role? 

We work collaboratively and find synergies with VCs, but ultimately, from a relationship point of view, we can better tailor our product by working closely with management teams and ensuring we’re aligned with founders. 

We sit on the boards of the companies that we invest in, as observers. What we're finding now is that they’re utilising us in an advisory capacity as well. 

What Atempo’s clients say

"Venture debt can play an important role in the financing of your business, to accelerate growth. Atempo took the time to understand the needs of Lantum, asking the right questions ensuring the facility was tailored to our business." 
Melissa Morris, chief executive, Lantum

"Growth debt is a great tool for business owners to complement equity with less dilution. The fit with the team at Atempo has been fantastic from day one, which is very important to us." 
Pierre Khoury, chief executive, Shippeo

 

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