Private Equity FunCast ARR Lending with PNC
Aug 15, 2024
Ankur Gupta, PNC's Global Head of Technology Finance, delves into the intricate world of tech lending. He explains what constitutes a 'good fit' deal and outlines the expectations during due diligence. The discussion highlights the importance of Gross vs. Net Retention metrics and how they influence loan values, along with the growing emphasis on recurring revenue in lending. Gupta also navigates the competitive landscape and offers insights on negotiating loan terms in a high-interest environment, showcasing the evolving dynamics of financing for software companies.
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A Facility That Scaled With Growth
- PNC financed a company at $150M ARR that grew to $300M ARR and expanded the facility from $225M to $550M.
- That demonstrates PNC's ability to scale facilities with company growth over time.
Show Strong Gross Retention
- Show gross dollar retention of ~90%+ and clear unit economics to access higher leverage.
- Lenders model downside using gross retention, not optimistic net upsell scenarios.
Gross Retention Trumps Net For Banks
- Net retention has generally come down and can be driven by price increases or consumption changes.
- Banks prefer gross retention as a truer signal of customer stickiness versus net metrics influenced by pricing or consumption.