Fifth Street adds venture lending strategy

Deals with Vista Equity and Thoma Bravo prepared the firm for the new strategy, says managing director Juan Alva. 

Fifth Street Management has expanded its business to include venture lending, the firm announced in a statement Tuesday.

Fifth Street Technology Partners will be led by Michael David, the former co-head of ORIX Venture Finance. The firm’s venture arm will provide financing for sponsor-led buyouts of companies exiting the “venture capital phase”, David indicated in a statement.

“We've looked at the venture space previously but were not prepared to enter it yet. After doing more deals in the tech space with Vista Equity and Thoma Bravo, we learned more and were better prepared to make a concerted effort to enter the tech lending business,”  managing director Juan Alva told Private Debt Investor.

Fifth Street Technology Partners will invest between $5 million and $50 million in structured and secured debt in venture capital-backed companies, according to a statement. The group will be based in Silicon Valley with another office in Dallas.

“We’re really concentrating on … building out the platform,” Fifth Street chief marketing officer James Velgot told Private Debt Investor, adding that the firm may soon branch into other lines of business such as aircraft leasing and life science investing in the future.  “We just think it’s a logical extension of our financing capabilities.”

“They all resonate with a similar idea – if you’re good at financing and origination, then you can do a lot of things with the right team.”

In addition to the formation of its venture capital arm, Fifth Street also announced the appointment of Frederick Buffone to lead its capital markets business. Buffone will be responsible for mid-market syndications and club transactions for the firm’s business development companies (BDCs), Fifth Street Finance Corporation and Fifth Street Senior Floating Rate Corporation.

“Fred's extensive background will be a tremendous asset as we expand our origination and syndication platform, particularly given the widespread demand for senior loans,” Fifth Street chief executive officer Leonard Tannenbaum said in a statement.

Fifth Street launched its senior floating rate BDC earlier this year. The BDC held a $100 million initial public offering in July.