GE Technology Finance, a US lender to growing technology companies, has launched a UK and Ireland operation headquartered in London.
The unit, part of GE Structured Finance, provides equipment and working capital debt financing to emerging growth technology companies backed by venture capitalists and other professional investors. The business has been operative in the US since 1998.
GE Technology Finance is targeting companies active in the communications, information technology, biotechnology, software and semi-conductor sectors.
In North America over the past five years, GE Technology Finance has lent more than $500m to emerging growth companies ranging from development stage to those that have matured beyond initial public offering. Farhaan Hassan will lead the London-based team.
Venture debt comes in two forms: a loan product and a lease product. It is used to assist young companies to survive while they are still burning cash without excessively altering its ownership structure. Typically the venture debt provider provides loan capital in return for interest payments as well as warrants for ordinary (or preferred) shares in the client company. Venture debt providers expect to be the senior secured lender and will insist on first call over a company’s intellectual property.
Hassan is optimistic about growth prospects in the UK and Ireland, saying: “These markets have tremendous potential and we are looking forward to helping fast-growing technology and life science ventures to develop. We’re able to bring a type of funding that’s not widely available to young enterprises.”
According to GE Technology Finance spokesperson Ivan Royle, the average deal size for the unit will be between $1m and $5m. The unit will take on bigger transactions although these are likely to be syndicated. “We have built up quite a track record in the US, where […] it is a popular form of financing because it enables owners to hold on to a greater proportion of the equity.”
In Europe, already established proponents of venture debt are ETV Capital, formerly known as GATX European Technology Ventures, and European Venture Partners. The two houses have already worked with European VC firms such as 3i, Benchmark Capital Schroder Ventures and Quester.
Regarding plans for expansion onto the European mainland, Royle said that there were no immediate plans to do so, but that ultimately it was a “definite option”.