Private Equity Vs Venture Capital. Similar but really quite different.

It’s more than sixty years since the birth of the Private Equity (PE) and Venture Capital (VC) industries, where both have evolved into ubstantial pillars of the investment landscape since their humble beginnings in the 1950’s.

While both sectors are now fairly mature, it remains surprisingly commonplace for business owners to use the terms PE and VC interchangeably. In concept, both are vehicles for capital to flow into private companies with the expectation of returns that beat the public markets, but the differences between these asset classes far outnumber the similarities.

In this short reading you will get an introduction to the two investment classes, and if you’re thinking of raising investment for your company the knowledge you’ll gain will help you to understand where you fit into the corporate finance landscape - and what you might want to think about when you pitch your business to GP’s (you’ll learn more about GP’s and LP’s shortly!).

Buyout Capital for UK Growth Companies

It was only a couple of months ago that businesses watched beyond belief as revenues dived and forward-looking sales forecasts became merely hopeful suggestions. It certainly remains a turbulent time but activity on both the investment side and the client side is now back at pre-crisis levels. The steep discounts that were being applied to forecasts and enterprise value through March/April when agreeing investment terms are now improving, and funds are again being committed for leveraged buyouts and growth-by-acquisition deals (telling us that deals can indeed be executed over Zoom!).
So where is buyout capital generally flowing in the current market? We’re placing capital predominantly into established businesses with positive cashflows, either to fund growth by acquisition, or for management to buy the company they’ve been running, and sector wise it remains quite broad as long as the revenue model involves regular cashflows (eg. contracted B2B service providers, where forecasts are less dominated by direct-to-consumer sales or large infrequent sales). It’s about backing opportunities with stable income, for a degree of de-risking against a still unclear horizon.


Aligned with this is VC funding that is selectively completing on deals now that the position of existing investments is more stable, with funds going to companies that have proven their business model and their market, and can demonstrate rapidly growing revenues.

Funding the bridging lenders, wholesale.

A day at the Finance Professionals conference recently reconnected me with a bridging lender we’d previously discussed providing wholesale funding for. For most bridge lenders in the market, their loan book is built by their own funds or with funds from their immediate investor network – and this often has limits on the availability of funds for the continual growth of the loan book. Ideally, a lender can access the wholesale funding market for an institutional credit line, just as we’re advising on for this current bridge lender.

Our institutional funding network has remained in strong support of bridging and development lenders – as well as B2B lenders – as long as we can demonstrate a well managed and sensibly leveraged loan book. Ultimately no institution wants to be over-exposed, so we work with bridge lenders to help shape their loan book for the most attractive terms for wholesale funding.

Implicit in procuring an institutional funding line for any lender – whether that’s for a bridge lending, corporate lending, or another provider in the general lending space – is allowing for future growth beyond the initial credit line and considering how to address risk if the preferred facility is capped or rescinded in the future. Where we advise on these scenarios we look at options for a suitable restructuring of the loan book to make it possible to access more than a type of credit line. Ultimately it’s about future-proofing sustainable growth of the loan book.

For institutional and corporate advisory inquiries call or email us and we will arrange to meet and discuss your business further

Coffee with a fund manager

At recent catch-up-over-coffee mornings with a couple of the fund managers we work with, the topic of conversation pivoted around corporate private equity at our advisory arm, and real estate developments of varying types. The travel across town to take my seat at the table affords time to read the business pages in the day’s paper – and to gauge whether news from the coffee table runs either in parallel or in contrast with the editorials of the day. After all, every paper will report its quota of economic and financial malaise!


Positively, the drive of those funds to deploy into new investments is still as strong ever, which aligns with the interest we continue to enjoy from investors taking part in the current opportunities at Axial Capital. Granted the positivity will be more lacklustre in some sectors as compared with others (if you’d co-invested with Mike Ashley in Debenhams your stock ticker may not inspire too much confidence at this point..). The point being that, whilst negative headlines continue to hold their share of newspaper square inches, coffee with an active fund manager now and then continues puts a positive light on the general economic undercurrent.


My view is partly driven by the current political position of the UK (and to some degree the EU and US), which here at home is as much in the doldrums as its ever been, but still GDP is forecast to grow marginally in the coming years and unemployment remains at record lows – and with new projects continuing to launch with positive interest from joint venture partners and investors alike, it suggests to me that we’re a robust society that will ultimately keep the UK on track in the long term. And that’s something to be upbeat about!

On the property front, recent figures show that remortgaging is running well above average, suggesting people are staying invested in their assets, and first time buyers are taking out mortgages at a level that outweighs movers and downsizers. With the Winter lull at an end there was an uptick last month in general SE property sales, and exceptional spurts continued to appear in some of the regional cities. The bottom line is that everyone fundamentally wants to carry on with their lives, their businesses, and their investments, and when I read tomorrow’s downbeat headlines I’ll take comfort that there are just as many good headlines!

Optimistic investor returns?

When we provide development finance for clients, there is quite often a request for equity funding as well as the senior debt, and this brings into frame the potential disparity between the expectations of investors and that of property developers.

As ever, there are two sides to the equation when bringing investor funds into a development project (ie. more than just senior debt), and it is often a matter of finding realistic common ground. An investor who chooses to take an equity stake in a development project is taking on the financial risk that the developer isn’t able, or willing, to take on at that point in time. It’s reasonable for an investor to want their interests to be protected to an extent – and it’s the preferred return we often need to balance with the developer’s expectations on the risk/return profile.

An article we liked is on the following link, and it looks into a recent survey of the investment/return expectations of the broader market, with interesting findings on risk appetite and ROI expectations:

Property Top Co-Financing

Through 2017 we have worked with clients and joint-venture partners on an array of development projects, and whilst most of these have involved us raising development finance & equity for clients, we have also had a number of inquiries for capitalizing fast-growing property development firms at the corporate, or Topco, level. This objective raises a number of questions, both for the development firm and for the investor side.

There is certainly a preference for the majority of funders to appraise and support developments on a case-by-case basis, as when money is ring-fenced and deployed it begins accruing returns (IRR) obligations from the outset. In the mid-size development space, it’s generally more efficient for money to be attached to a single, identified asset, for measurable anticipated results. Accordingly, a good deal of the money that supports those mid-space developments adheres to this funding philosophy.

When funds are being requested at the Topco level, for discretionary use across a broader portfolio of developments/projects, a funder must accept a less precise – and essentially more aggregated – investment dynamic, with generally a longer timeline and a more variable risk profile. Many funders in this mid-size development space opt for a case by case funding model as it allows them to manage their portfolio risk more directly.
Equally, from the perspective of the property firm, the question must be addressed with respect to why they really need or want Topco investment. Doing this will often result in giving away a solid stake in their business, and more poignantly – if the business doesn’t have the equity or asset base to support portfolio-level development, is it really the right time to ask someone else to take the equity risk? The answer may well be yes, and for experienced, niche operators we have seen solid interest from larger funding offices to support that growth – though not without addressing the above line of questioning.

To discuss financial structures to suit your development pipeline, call us on 07718 966556 or email

World-class in access to private equity & venture capital

Policy, infrastructure, education, and general ‘attractiveness’ to private equity and VC investors – that’s a description recently applied to the UK in an international evaluation of funding & investment activity.
That doesn’t come as a surprise to me in light of the current levels of both equity and debt funding we have access to for commercial and residential property developers. Notably, the value range has remained as strong as ever, with appetite holding at the £5m+ level for the most part, and a draw toward equity stakes and levered returns giving developers as much choice as ever.


Furthermore, medium-term horizons are being maintained, with capital for the development of operating assets (care-homes and the like) still looking at 3yr+ tie-ins.

Corporates continue to hedge their bets on the forward-looking operating environment inside/outside the EU, with apparent proclivity toward maintaining some degree of presence in the great city of London whatever the outcome. We continue, positively


Putting capital together for property developers

Increasingly when we structure a finance solution for property developers at £2m+ we are drawing on our equity partners to get the client across the line on the overall project funding.

As much as people may tout 100% finance (and yes, this is possible – if a very thorough business case is made), the reality is that any investor would prefer to see a developer make some show of financial involvement (just a few percent in many cases) to build a partnership for doing more business together in the future. And this is how we approach business when we source funds for developers – which has had the positive effect of bringing more funding partners to engage with us.

The right capital stack is about achieving balance – both in terms of returns and security for investors, and in terms affordability on the cost on the money overall – and we’re seeing this being achieved for more and more developers on some really great developments.

A case-study of development finance cross-collateralisation

Over the past 6 months something we’ve had requests for, on a number of occasions, is cross-collaterised development finance facilities, where developers will undertake a number of separate developments – but they want a pre-agreed funding arrangement to cover all the proposed sites. The facility size in each case has been in the region of £3m – £5m.

Positively, we’ve structured good solutions to each of these. In the case of multi-site residential projects we’ve seen good support with well-priced debt funding and even profit-participation agreements, and; on commercial developments with good tenant pre-commitments the joint-venture equity funding lines have been quite attractive.

All in all it suggests the positive market metrics, such as the recent RICS growth predictions, are carrying through to the marketplace – and to the developers we provide structured finance for.

Implementing property bonds into funding structures

This year we have been evolving our funding models to provide development finance for UK property projects, not only via secured debt facilities and private equity placements, but more recently with the use of property bonds. The question becomes one of choice and suitability, as costs and timing are key considerations when deciding which type of funding to employ.

We recently arranged a property bond for a hotel joint venture, where the property already existed and had a tangible value, but had upside potential via a schedule of improvement works and operational streamlining – if the client had the funds to acquire the site. Whilst being set up as a joint venture, it wasn’t feasible to deploy private equity investment due to the extended timeframes required for improving and enhancing the operational position of the hotel. Accordingly we structured a first charge property bond to allow a 3yr horizon for an exit or refinance of the property – giving investors a secure asset backed medium term investment, and at the same time giving the hotel company access to capital to acquire and improve a core operational asset.

To discuss funding models suitable to projects across the UK, we invite you to look over our website at or to contact us directly on:

+44 (0)7718 966556 /