In 2018, Nelson Chu founded Percent with the goal of bringing investors, borrowers and underwriters together to modernize private credit. Seeing an opportunity to tackle the lack of risk management in the market, Chu created a marketplace that enables investors -- specifically accredited retail investors -- to participate in private credit.
It's been a success by all appearances. Percent is projecting a 2.5x increase in top-line revenue and a 3x increase in annual recurring revenue in 2023. And while the business isn't yet profitable, Chu expects that'll change in mid-2024.
"The first iteration of Percent created a value-focused investor experience," Chu told TechCrunch in an email interview. "The evolution of the platform resulted from learning what was broken by running the marketplace, building a team of public debt market professionals and ultimately applying proven public debt market concepts and standards to its marketplace."
Chu credits Percent's recent growth with its decision to pivot to software-as-a-service (SaaS) -- a decision investors rewarded. Percent this week closed an oversubscribed $30 million Series B funding round led by White Star Capital with participation from Susquehanna International Group, B Capital and others, more than doubling the company’s warchest, which now sits at $48.2 million.
"Private credit has never been more in demand," Chu said. He's not wrong. According to a Preqin survey of investors, private debt will grow to $2.3 trillion in 2027, with almost two-thirds of those surveyed looking to increase allocations to the asset class.
Percent's SaaS solution powers the sourcing, structuring, syndication, surveillance and servicing of private credit transactions. At a high level, Percent allows investors to find and compare private credit deals, which promise both high returns and resilience to recessions and inflation.
"We spent the first four years of the company’s life underwriting our own deals, learning what it takes to successfully operate and scale in this market," Chu explained. "Starting in January 2023, we made the shift away from underwriting and became a pure play software solution, allowing all three sides of the market to collaborate and transact from end to end."
Private credit, like private equity, raises capital from investors. But instead of taking ownership of a company, private creditors lend the money to companies, bypassing banks.
Private credit has grown quickly, hitting $1.4 trillion of assets under management globally at the end of 2022, up from about $500 billion in 2015. But it's inherently risky.
Most private credit funds haven’t lived through a prolonged recession, which typically bring about spikes in defaults. And they aren't overseen by banking regulators.
But Chu points to firms like Apollo Global Management (full disclosure: the owner of TechCrunch's parent company), Ares Management and Blackstone, all of which have developed large private credit operations, as supporting evidence that private credit has its merits. As for Percent, Chu claims that the startup has several dozen borrower and underwriter clients and thousands of investors across retail accredited, family offices and credit funds.
"Historically, it's been very challenging for investors to access private credit, but Percent has been a game-changer, and its unique marketplace simplifies investment discovery, giving institutional and accredited investors access to a broad selection of higher yield, short duration, securitized investments," Chu said. "We're in the fortunate position of being the infrastructure provider and we can succeed and scale in high rate or low rate environments, it makes little difference to us as long as transactions are still happening and given how fast the market is changing, primary issuance, secondary sales, and refinancings are happening at a more rapid pace than ever before."