Percent Raises $29.7 Million in Private Bond Market to Boost Liquidity Options – AlleyWatch

Private placement credit has historically provided investors with premium yields above and beyond typical public market fixed income products. As the traditional credit markets dwindle from lending in the commercial market, more and more companies, especially those backed by private equity, are turning to private credit for their funding needs. Investors as well as non-bank lenders and financial institutions are responding to this need. Just yesterday, it was reported that SoftBank is considering entering the private credit market. percent is a private credit market that brings public market-like characteristics to the historically opaque private credit market. By leveraging technology and organizing heterogeneous markets, the platform has been able to provide data-driven transparency while enhancing speed and execution capabilities at a fraction of the cost. Percent handles transactions from initiation to delivery, and structuring, syndication, and monitoring in between. Since its launch in 2018, the platform has worked with borrowers, investors and underwriters to process over $1.2 billion in transaction volume.

alley watch We spoke with the Percent CEO and co-founder Nelson Chu To learn more about the business, the company’s strategic plans, the latest funding round that brought the company’s total funding to $48.5 million, and more…

Who are the investors and how much did you raise?

Percent’s $29.7 million Series B funding round white star capital additional investment by B Capital Group, Susquehanna Private Equity Investments LLLP, BDMI, Forte Venturesand vector fintech. This round also included several strategies including: Evolution VC and Global Fintech Venture Partner.

What products or services does Percent offer?

Percent has built the modern credit market, providing investors, borrowers and underwriters with innovative technology to increase the speed and velocity of private credit transactions at a fraction of the cost.

The company’s core infrastructure empowers end-to-end private credit sourcing, construction, syndication, oversight and servicing, bringing public market efficiency to analog private credit markets.

What inspired you to start Percent?

I founded Percent in 2018 with an overall vision to modernize private credit by connecting investors, borrowers and underwriters to technology-driven markets. I recognized the lack of automation, standardization and risk management in this $7 trillion alternative market segment and wanted to address it.

In the first iteration of Percent, we created a value-driven investor experience. This allowed accredited investors to find deals and enter the historically exclusive private credit market for a fraction of the price. It now includes borrowers and underwriters in addition to investors, all rolled into one.

The evolution of the platform came from learning what was broken by market operations and building a team led by public bond market experts. plus lady, Percent President, ultimately applying proven public bond market concepts and standards to the market. From here came a vertical SaaS solution built on transparency, specifically for the opaque private credit market.

Percent has become the platform that powers the entire transaction process. Borrowers have access to growth capital, investors can earn yields, and underwriters have more deal flow and efficient workflows. Percent remains focused on capturing the growing private credit market and the $4 billion annual revenue opportunity not seen in its current analog state.

How are percentages different?

Historically, access to private credit has been very difficult for investors, but Percent is a game changer, with its unique marketplace simplifying investment discovery and making it accessible to institutional and accredited investors. Homes will have access to a wide selection of high-yield, short-term securitized investments. . The Percent Platform not only provides access to private credit investments, but also provides significant opportunities for corporate borrowers. Access to capital, and how to raise it when needed, is more important than ever for businesses, especially in the current difficult and uncertain economic environment, and Percent fills the void and invests , borrowers and underwriters. This is unprecedented and creates opportunities for all players within the private credits area.

Percent is the only platform created for all three private margin trading audiences, or parties.

What markets does Percent target and how big is it?

Percent targets the multi-trillion dollar private credit segment of the alternatives market.

The private credit industry is growing fast, Preqin predicts it will grow to $2.3 trillion by 2027

What is your business model?

We have created a software suite for each member of our three-sided private credit marketplace. By providing each group with the tools, workflows and resources they need, Percent’s revenue stream has expanded from investors to borrowers and now insurance companies. A one-time transaction fee becomes a recurring software fee, allowing for long-term planning.

We have created a software suite for each member of our three-sided private credit marketplace. By providing each group with the tools, workflows and resources they need, Percent’s revenue stream has expanded from investors to borrowers and now insurance companies. A one-time transaction fee becomes a recurring software fee, allowing for long-term planning.

How are you preparing for a potential economic slowdown?

As a company, internally, we are always cautious and conscientious about how we run our business. We don’t take unnecessary risks, we don’t spend extravagantly, and we think wisely about where and how we allocate our resources. We are building one of the generation-defining companies in the fintech space, but the journey takes grit and determination. We’ve been through a lot in the last five years, including COVID-19, high interest rates, and a slowing economy, but we know that to succeed in the next five, we need to keep pushing forward.

On the business side, a potential economic slowdown is actually proving to be a good thing for us. Blackstone, Apollo, KKR, JPMorgan and Goldman Sachs all tout the benefits of private credit in this inflationary and high interest rate environment.

Also, with venture capital nearing its lowest level since 2017 and heightened regulatory scrutiny following the SVB collapse, funding challenges have come under the spotlight, with demand for private credit and venture bonds in particular surging. ing. Venture debt is an asset class that serves as a much-needed solution for some start-ups to minimize equity dilution and increase growth.

As the best-performing alternative investment over the next five years, these developments are acting as positive tailwinds for Percent and the industry as a whole. Expanding understanding and access is essential for this success to continue.

What was the fundraising process like?

Like other rounds for other startups on the market today, this round was not easy to complete. We had hundreds of talks with VCs and made a lot of passes early in the process, especially since the VC stock market was locked.

It took the market tailwinds of bank failures and a surge in demand for private credit from venture capital to understand the power and potential of this asset class.

We are the only vertical SaaS solution for this multi-trillion dollar market, and it has become so clear in the last few weeks that we were able to quickly oversubscribe.

We expected to eventually close the round at around $20-25 million, but interest from new investors far exceeded our expectations, allowing us to close the round at nearly $30 million. .

Like other rounds for other startups on the market today, this round was not easy to complete. We had hundreds of talks with VCs and made a lot of passes early in the process, especially since the VC stock market was locked.

It took the market tailwinds of bank failures and a surge in demand for private credit from venture capital to understand the power and potential of this asset class.

We are the only vertical SaaS solution for this multi-trillion dollar market, and it has become so clear in the last few weeks that we were able to quickly oversubscribe.

We expected the round to end at around $20-25 million, but interest from new investors far exceeded our expectations, and we were able to close the round at nearly $30 million. .

What was the biggest challenge you faced while fundraising?

Initially, as a first-time VC-backed founder, funding was a challenge for me. Because I had no traditional ancestry, the market was perceived as saturated and private credit was misunderstood. This didn’t slow me down. Instead, I used my credit to fund the company and received very little pay for the first few years. By ending our angel investment in a timely manner, we were able to pay off the $80,000 debt we used to expand. Ultimately, the VC funding continued, and each successive round proved my belief and dedication to transforming the market for the better.

The challenges I faced early on have now prepared me better in terms of fundraising. And that, coupled with the incredible investors who believe in what we’re building with his Percent, has given me the confidence to move forward.

What factors about your business made investors write checks?

The global private bond market is huge and its growth is gaining momentum. Investors saw Percent’s unique end-to-end infrastructure solutions for a huge multi-trillion dollar market and believed in our approach to providing an alternative source of investment for the entire startup ecosystem.

What milestones do you plan to achieve in the next six months?

We expect to increase the number of full-time employees by 14.5% by the end of the year.

We look forward to continuing to expand and improve our solution, acquiring more proprietary technology to enhance transparency to all trading participants, and exploring commercial collaborations.

What advice would you give to New York companies that haven’t recapitalized their banks?

It is difficult to raise equity capital this year. Do everything you can to reduce costs and strive for profitability as soon as possible. If you want to take advantage of venture bonds, do so when you still have enough cash in your bank to get more favorable terms. Above all, influence these fundraising conversations to find out how you can raise money on your own terms. The best way to do so is to show it with numbers and metrics that make your story undeniable.

Where do you see the company going in the short term?

In 2023, sales are expected to grow more than 2.5x year-on-year and ARR more than 3x as a result of the move to pure software solutions.

Achieved 89% gross margin and 42% net margin from all customers in 2 years.

We expect to be profitable by mid-2024 as the pace of revenue growth and expenses remain relatively flat/consistent.

Where is your favorite coffee shop or place to hold a meeting in your city?

The Lobby Lounge of the Park Hyatt on 57th Street. It’s between my apartment and my office. It’s never crowded, the atmosphere is quiet, just order a cup of coffee or tea and you can stay as long as you like.

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