For many tech founders, equity has long been the default fuel for growth. But funding models evolve, just like the innovative businesses they support.
Today, more founders are exploring non-dilutive alternatives for growth. Debt, once seen as too rigid or too risky for high-growth tech, is being reimagined.
Most tech businesses do not follow traditional business models. They front-load costs, invest heavily in product, people, and customer acquisition, and typically operate with deferred revenue. It is a model built for scale, not steady-state profits.
This creates cashflow volatility that traditional lenders often shy away from. But it also creates opportunity.
Many of these businesses generate predictable recurring revenue, boast strong customer retention, and hold valuable IP — all of which can be indicators of creditworthiness, even if EBITDA is still negative.
In my own experience the key is understanding that growth investment – when well executed – is not reckless spending. It is deliberate, measured, and often the clearest sign of future success.
In this environment, debt has become a valuable bridge. It enables founders to stay on track, avoid raising further equity at compressed valuations, and retain optionality for future rounds or exits.
More importantly, it sends a signal: this is a company mature enough to handle leverage, confident in its model, and disciplined in execution.
One of the enduring challenges here is how to value intangible assets. Code, customer contracts, data and brand do not show up on a balance sheet like property or equipment — but they are often far more valuable.
It follows that progressive lenders are starting to look beyond physical collateral, focusing instead on contracted revenue, product defensibility, market position and the quality of customer relationships.
As tech funding models evolve, so too should their geographical footprint. Despite a wealth of talent and IP across the UK, the funding landscape remains heavily skewed towards the South.
Across all data sets, London and the South East dominate in both deal count and total investment value. Before Tech Nation ceased operations, its data consistently showed that over 60% of UK venture capital went to London-based companies.
Manchester, the UK’s largest regional tech hub, attracted less than 10% of the capital raised annually by companies in the capital.
These disparities point to a need for a different approach. At Palatine, we launched our £80m Growth Credit Fund in 2024 precisely to address this gap.
Our focus is on fast-growth B2B tech companies in sectors such as AI, SaaS, cyber, and fintech based in the regions.
This is not about replacing equity; it’s about expanding the funding toolkit. When structured around tech realities debt becomes a strategic lever, not a liability.
Almost 18 months after launching the fund, we have completed five deals backing brilliant companies in Bristol, Yorkshire and Manchester.
The demand from innovative, regionally based tech firms is clear — and we are excited to back more, whilst helping to levelling-up the regional tech funding ecosystem.
Ryan Sorby is partner and head of the north at Palatine Private Equity
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