Key Takeaways
- Sector: Financial Services & Fintech.
- Geography: United Kingdom, France.
Analysis
In the challenging landscape of 2008, a nascent firm, 17Capital, embarked on establishing a novel financing category for private equity. Co-founders Augustin Duhamel and Pierre-Antoine de Selancy, having met while working at Paribas in Asia, recognized a significant market gap. Despite the global financial crisis erupting shortly after their official launch in September 2008, they pressed forward, demonstrating remarkable resilience and strategic foresight.
The firm's genesis involved a deliberate choice to anchor operations in London. This decision was driven by the UK's preeminence as Europe's largest private equity market and the ambition to cultivate a global franchise. Duhamel emphasized London's superior talent pool as a critical factor in building an institutional-grade business capable of attracting top-tier professionals.
Fundraising for their inaugural vehicle presented formidable obstacles. Targeting €200 million, 17Capital secured its first close with just €23 million from three initial investors. This figure fell significantly short of the industry norm for a first close, typically around half the fund's target. However, the decision to proceed with this initial capital was pivotal, allowing the firm to commence operations and build momentum during an exceptionally difficult period for capital raising.
Beyond investor acquisition, 17Capital faced the crucial task of building trust with essential service providers. Convincing banks, lawyers, and auditors to partner with a first-time fund manager employing an innovative strategy required significant effort. Successfully onboarding these key stakeholders laid the groundwork for long-term relationships and solidified the firm's credibility within the financial ecosystem.
Early milestones included their first deal alongside a Canadian pension fund, a significant validation of their strategy. The firm's subsequent expansion saw the establishment of a New York office, the launch of a substantial $3 billion Credit Fund, and a strategic partnership with Oaktree. These developments underscore 17Capital's growth trajectory and its increasing influence in the NAV finance sector.
Reflecting on the market's evolution, Duhamel posits that NAV finance is still in its early stages. With only a fraction of private equity managers having utilized this financing tool, the market stands at an inflection point. The continued growth and adoption of NAV finance are anticipated, driven by its ability to provide flexible capital solutions for private equity portfolios, a trend that has seen significant acceleration in recent years with numerous funds raising billions for similar strategies.