5-Minute Interview with Stephanie Heller and Fatou Diagne, Bootstrap Europe
Dr. Dorothy Kelso
Managing Director, SuperReturn | Board Chair | Emerging Manager Champion
In this series of 5-minute interviews, I shine the spotlight on up-and-coming fund managers in private markets across the globe. All geographies. All strategies. All sectors.
Here's my conversation with Stephanie Heller and Fatou Diagne, Founders and Managing Partners at Bootstrap Europe.
Quick facts about Bootstrap Europe:
Q: What is Bootstrap Europe’s investment strategy?
A: We invest through growth loans in businesses focused on disruptive technology and sustainable innovation around Europe. Our highly differentiated growth debt strategy is to gain exposure to rapidly scaling European technology companies and generate gross cash yield on loans enhanced with return on warrants and equity participations rights.
Q: What are the market drivers for growth debt?
A: SVB, the largest growth lender in Europe, disappeared this year. We estimate that they invested $500m - $700m per year in direct loans to technology companies in the UK alone. This opens opportunities for entrepreneurial tech lenders like Bootstrap in the UK.
The SVB crisis is adding to a series of existing trends. Over the past 18 months, it has already been hard to raise funds as a tech business and as a VC. Equity becomes very expensive, making alternative forms of capital very attractive.
In these moments of the VC cycle, at Bootstrap, we are well positioned to support VCs and entrepreneurs. Companies & VCs come to us at Bootstrap Europe to top up rounds and make sure the companies have 24-36 months of cash on their balance sheet to weather this cycle.
Q: What’s the team’s track record?
A: Our highly cohesive and seasoned team have a track record of 106+ loans in 41+ scale-ups. We also have a prior history of 267 transactions in 138+ companies across 12 European jurisdictions.
Q: How do you source deals in growth debt?
A: Our extensive network, experience and unique approach means we see most of the opportunities in this area. We have co-invested with the majority of top tier VCs in Europe and we are known in the industry for our technical strength structuring more complex deals than vanilla lenders.
Q: What would you say to a VC or company owner who is unfamiliar with growth debt?
A: A growth lender can be a key building block to a tech company's success and a good complement in an innovation portfolio.
Q: Where – or how – does ESG fit in when investing in growth debt?
A: It’s integral to what we do. We are the only fund with a clear track record of allocating to growth companies with strong sustainability attributes and integrating ESG filters at loan origination stage. About two thirds of Fund I & II companies meet key ESG criteria. Fund III and future funds are compliant with Article 8 of the SFDR.
Q: The SVB acquisition was a significant one for you. How did it come about and how is it going?
A: We’re extremely honoured to have been selected by the FDIC, the US regulatory authority, from a high-end group of firms, to buy out the German arm of SVB. There were a number of reasons behind our decision to buy the venture and growth business of SVB in Germany.
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First, it made sense strategically. The buyout fully supports our own growth plans following the recent close of our last fund. Germany was on the top of our strategic growth map.
Second, over the last decade, great German VC franchises were created with high quality teams selecting impressive start-up successes. A strong innovation ecosystem has flourished in Germany.
Third, Germany is a hotbed for sustainability-focused growth tech businesses. Our commitment to our Article 8 requirements, has dictated the criteria we look for when investing.
And it’s going well. With 3 months of hindsight, it’s great to see that the acquisition has had a positive impact on the market's perception of the German tech and venture sectors. Interest in the region's innovative startups is unchanged, and this highlights Germany's position as a hub for technology and entrepreneurship. We hope that our strategic investments in the region have the potential to stimulate growth, support startups and fuel innovation.
Q: How did your hands-on expertise help you win the SVB acquisition?
A: You can imagine the operational complexity of a deal closed in one month from start to finish and involving assets owned by the US regulatory body. Our team at Bootstrap is extremely diverse: from age to origins, languages, cultures, professional backgrounds, genders, religions.
This diversity is our strength. It was the key to winning the SVB deal, from the modeling done by our finance team with backgrounds in big 4, to the corporate structuring with our COO Kas, the in depth knowledge of the SVB thanks to our partner Eliott who is an ex-SVBer, the pricing and due diligence on so many assets with our investment team, to money raising and hedging with our partners at Bootstrap.
Q: How are you building your team?
A: We are a small team of highly skilled, highly passionate investment professionals. Our ambition is to be the “Sequoia” of venture debt. The biggest testament to our performance as a team is the outstanding references we receive from our portfolio companies and the tech founding teams we have financed over the years.
Q: How do you see your business scaling?
A: We are passionate about doing more of the same i.e. growth loans to technology companies and accompanying entrepreneurs in their growth. We will progress through opening new geographies and extend our ability to follow-on scaling businesses.
Q: What are the key ingredients of your success?
A: We believe every complex situation has a solution. Very often when companies face an issue, they are surprised how resourceful we are as a lender to help them find a solution. Creativity in entrepreneurship is key to problem solving and to lower loss ratio.
Q: What valuable lesson have you learnt that helps drive your success?
A: Long term investment in nurturing your relationships matter, both personally and professionally. We have been working together for over 20 years and have financed some of our companies over 3-4 cycles of growing and successfully fundraising. We learnt and grew with our Limited Partners and it can be applied everywhere. Building the 3 Ts is key for any partnership, whether professional or personal: Trust, Transparency and Track record.
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