A burst of growth from technology companies, especially software groups, is behind lender Golub Capital LLC's decision to grow its late-stage-lending unit. The product provides loans to growing, venture-capital backed companies or other private owners. Golub has added two professionals and a new office as part of its expansion in the space - Peter Fair as managing director and Robert Sverbilov as director.
Fair and Sverbilov are both based in San Francisco to be close to Silicon Valley. "The firms that are the most interested are located in the valley," says Golub's Andy Steuerman, head of middle-market and late-stage lending for Golub.
Golub's late-stage-lending unit is looking for expanding technology companies that want to reinvest most of their cash flow into their business to drive growth. Loans from the unit are meant to provide structural flexibility, allowing borrowers to pursue rapid growth strategies, be less restrictive and offer greater scale than traditional venture debt or bank debt, and be less dilutive than equity.
Golub's late-stage-lending unit has been in the space for more than two years. "We had a thesis that there could be a demand for this in the market, and the demand has gotten to the point where it's time to add resources," says Steuerman.
The late-stage-lending team holds credit facilities from $15 million to $75 million in technology companies that are backed by venture capital, growth equity, private equity or other private companies.
The late-stage unit is part of New York-based Golub's middle-market lending business - the firm also operates broadly-syndicated loans and opportunistic credit segments.
The product is used by businesses that do not fit the traditional credit metrics of middle-market lending. It meets the structural flexibility of equity, but with less dilution, according to Steuerman.
The technology borrowers are often using the credit to expand their sales and marketing efforts and grow their top line, write more code or develop new products.
"There's a lot of demand. It was time to expand," Steuerman says.
Private equity firms are starting to show more interest in the software space as the industry shifts more towards software-as-a-service. Recent M&A transactions in the software space include Boston private equity firm TA Associates' investment in software company Idera, in September, and San Francisco-based Thoma Bravo's $2.5 billion agreement to acquire business software group Compuware, also announced in September.