Adam Torres and Benjamin Wul discuss the growth debt market.
Subscribe: iTunes / Spotify
Apply to be a guest on our podcast here
Show Notes:
Listen to the Venture Debt Conference coverage. In this episode, Adam Torres and Benjamin Wu, Head of East Coast and Managing Director at ORIX Growth Capital, explore the debt market. Benjamin will also be participating in the Venture Debt Conference hosted by DealFlow events.
Watch Full Interview:
About ORIX Growth Capital
Established in the U.S. in 1981, ORIX USA has grown organically and through acquisition into the investment and asset management firm we are today. With a specialization in private credit, real estate, and private equity solutions for middle-market focused borrowers and investors, we combine our robust balance sheet with funds from third-party investors, providing a strong alignment of interest. ORIX USA and its subsidiaries — ORIX Advisers, ORIX Capital Partners, Signal Peak Capital Management, Boston Financial, Lument, Real Estate Capital and NXT Capital— have approximately 1300 employees across the U.S. and have ~ $89 billion in assets, which includes $39.4 billion in assets and commitments*, in addition to $49.4 billion in servicing and administering assets, as of September 2024. Our parent company, ORIX Corporation, is a publicly owned international financial services company with operations in 30 countries and regions worldwide. ORIX Corporation is listed on the Tokyo Stock Exchange (8591) and New York Stock Exchange (IX). For more information, visit orix.com.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to mission matters.com and click on Be Our Guest to Apply. All right, so today I have a very special episode. This is part of the Venture Debt Conference series that we’ve been putting together for the guys over at Deal Flow events and all the great work.
Phil and his team have been doing over there. And my guest is Benjamin Wu. He is the head of East Coast and managing director over at Orx Growth Capital. Benjamin, welcome to the show. Thank you for having me, Adam. Good to see you all. All right, so we got a lot to cover today. I of course wanna get into the work being done at Orx Growth Capital.
We’re gonna talk a little bit more about the Venture Debt Conference coming up where I understand you’re gonna be one of the panelists and on a panel and doing some other things. We’re gonna get into the state of the growth debt market overall. What does that look like? Especially after the emergence from the 2022 downturn.
So that much, much more. But to get us started, we’re gonna start this episode the way that we start them all with what we like to call our mission matters minute. So Benjamin at Mission Matters, our aim and our goal is to amplify stories for entrepreneurs, executives and experts. That’s what we do.
Benjamin, what mission matters to you? I. My mission in doing what I do really is to, I would say, change the world. One growth capital investment at a time. Yeah. You know what I mean by that? Thank you. What I mean by that is I’ve been fascinated with, with technology since I was a kid. I’ve been, I was coding, I think at 11 or 12, and I, I basically, I helped pay my way through college by by working at IBM coding on the Olympics web server and have loved tech since then.
And so. What I’ve done is in those 20 years since college, I’ve been investing in both tech and non-tech businesses across private credit and private equity. Mm-hmm. But what really interests me is finding. Interesting technology companies that I think improve efficiency and resiliency in the world.
Mm-hmm. And being just a part of their journey and touching those companies. And, and the way I do it is by giving them money. And hopefully that is a, is a good thing over time. Yeah. That’s great. Love, love bringing mission-based individuals on here to share what they do and why they do it, and really how they’re doing it.
So we all learn as well from that. I wanna stick in, go back to those early days a bit longer here. So you’re into tech. You obviously, as you said, paid your way through college by working, you know, for firm for IBM like when did that love for tech? I don’t know if it morphed or changed or like. How did that transition into finance work?
Like when did that take place and how? Yeah, I mean, I would say the school I went to, so I did my undergraduate at, at Penn, I did this dual degree between Wharton and engineering. And I came in thinking that I was gonna do all tech. Yeah. And I really kind of build a software company one day. And I think what happens at the school I went to is everyone kind of edes towards finance.
And so, you know, I think as, as a mix, I ended up. Being much more, very early in the private credit world, which is now a huge moving sector within managed Capital. So I, I started, my first investment job was at, was at Goldman and then I was at Fortress where I was the first associate in the direct investing side.
Mm. And I kind of launched into a career over time where I was both in tech growth equity, I was one of the early folks doing growth equity at General Catalyst, which is now, you know, a 35 billion plus a company. So. You know, I’ve had a good track record of joining companies that eventually become much, much larger over time.
Dang, man. You trying to join Mission Matters? I’m just No, I’m actually, and I’m hoping that after this you’ll offer me a role, but I, I, I need to do a good job first on this. I understand. I’ll try to be as charismatic as as possible to the extent I can. But, you know, private credit, huge technology growth.
Equity has been, you know, massive sectors that have been very high growth. And I think that. Over time, I’ve kind of combined those two to be looking at a right, which, we’ll, I’m sure we’ll talk about the growth debt sector as it pertains to investing in technology companies. In the form of growth capital to help them drive their growth.
Yeah. Let’s take a, a quick step back here. I don’t wanna understand, I, I don’t wanna assume that everybody understands maybe what the venture debt market even is. So maybe give, give us some definitions in there. Let’s start, let’s start with the basics as we build this conversation out. Sure. That sounds good.
I would say growth debt is I’d start with is incredibly intertwined with the equity market. So everyone’s heard of venture capital, it’s so well known. Even folks who don’t know what VC is, are interested in hearing about it because it’s well known. And so, you know, VC as a, as an industry has grown tremendously and has invested in very early stage companies, helping them launch their businesses, whether it be for r and d, but a variety of different areas that help these companies launch over time.
As these companies get larger and larger, they still need to consume capital. Much market is still in equity where these companies, as they get larger and larger and even up through pre IPO, and sometimes after IPO, they’re still raising equity capital to drive growth. And these investments can start from anywhere from, you know, 102 hundred 50 k pre-seed to hundreds of millions of dollars and up.
You know, as they get towards pre IPO zone and that equity market is large, healthy, and is driven by a variety of factors, particularly around equity valuations and exits. The growth debt market has risen in parallel with the equity market, but in some ways much slower. Mm-hmm. A lot of the growth of tech has been on the back of strong equity investing, but the growth debt market basically provides capital to these companies in a way where these companies.
Are not giving as much as of their equity away part of raising that capital. And so one day when they exit, they sell the company or IPO, they will own more of the companies than they would otherwise have. They financed all of their growth. With equity and so, mm-hmm. I would say in the last six, seven years that market has, has continued to burgeon.
Yeah. It’s quite a sizable market now. It’s, I think it’s roughly a fifth of the equity market. That market itself has, has burgeoned in terms of number of players as well as between the bank and non-bank side of it. So it’s a very robust market now where companies are efficiently raising capital or they’re looking to raise capital not only by equity, but via debt as well by debt venture debt.
And I understand, I’m getting back to the conference for a moment or two. I understand you’re gonna be participating in the Venture Debt Conference. You’re gonna be, you’re gonna be talking about this and more, maybe talk a little bit about the panel that you’re gonna be on for the Venture Debt Conference.
And I know it hasn’t happened yet, so Yeah. You know, we’re gonna talk high level. No. Spoilers there. Obviously the people there that are, that are attending, they’ll see it and I’m sure maybe it’s gonna be recorded and distributed later, but give us a little bit of a flavor of, of what’s gonna take place.
Sure. Well, you know, well, hopefully there will be some discussion on topics that not, that’s not, not all about terrorists and how it impacts the it’s gonna come up though. Come on. It’s hundred percent gonna come up and it will probably be 99% of the conversation and how it impacts. The economy, and particularly this type of investing in this asset class.
Mm-hmm. But the reality is that, you know, as I mentioned, this area is growing. It’s growing rapidly. It’s been impacted in very various ways through technology cycles 2022, where we are today, tariffs. It’s intertwined with what happens with the overall macroeconomic environment, as well as with what’s happening with the equity environment.
But this panel specifically is talking about considerations and raising venture and growth, debt timing considerations, other considerations around how to raise it and what to think about and raising it next to equity, and excited to have that conversation. And, and I do think macro economic factors for any technology investor is a huge part of how one approaches a company, both in terms for the investment.
Both in terms of how well that company is gonna perform, but also how, you know, what are the investment cycles and how does that impact when thinks about the investment. They’re all very germane to the investment, I’d say viewpoint. What kind of trends are you following right now? Like, you’ve been in this game for quite some time now, a lot of big companies you’ve worked for and with what kind of trends, like what excites you right now?
What, what are you following? Yes. So I’d say there’s a number of different trends. You know, I’ll just start with the IPO market, which is basically just the, almost the bellwether in terms of these companies that are being invested in by these VCs early on. Mm-hmm. These companies are, are looking to grow and grow rapidly by consuming capital, investing in their technology, engaging with customers, and eventually if they’re successful, they can IPO and therefore bring liquidity to investors and also to founders.
The IPO market has been quiet the last couple years, and as you been following, they’re a little bit more quiet now. 2025 was supposed to be the year where things opened up. It was gonna be a great year. A lot of companies last year were thinking about post-election. There was going to be a, a raft of different IPOs this year.
A lot of those in, in more, more recent, and by the way, like last week, a lot of these companies thinking, you know, maybe we wait a little bit as we look for stability, that IPO market and the health of the IPO market really kind of trickles down to the entire ecosystem. So growth, equity, these larger checks, they invest in these companies because they think they’ll be able to get an IPO and get liquidity.
Mm-hmm. If there isn’t IPOs happening, growth equity often is a little bit slower as well, because that’s how they get exits in their investments and therefore raise new funds. And so the whole system is a little bit slower. Venture capital, which starts very early, and of which sometimes returns are. High single digits to 10 years plus.
Mm-hmm. They have a very long timeline, so that has remained more active. So the earlier the stage, the more active it has remained. Yeah. The later in some ways has been a little bit less active because those near term exits are not there. It is tied very much to m and a as well. If there’s an active and healthy m and a market that also can, can kind of unstuck the system.
Mm-hmm. But there has to be healthy exits. That has been sort of a real interesting, I would say, evolution the last couple years where it’s slowed down some And how do these companies survive and raise capital in that environment? And I’d say two things. One. Without a doubt, companies have gotten more efficient.
Yeah, they’ve looked at their entire cost base and are they, number one, generating revenue that actually will make them money? Number two, do they have profitable the operations that can help them become profitable? Or reduce the burn so they don’t have to go out and raise so much capital. Mm-hmm.
That’s a huge part of it. And I would say number two, companies that are raising capital, equity capital are very high growth. They’re really the, the, the companies that the equity investors wanna invest in because they’re growing very rapidly mm-hmm. Is a whole class of companies that are, are very high quality companies.
They may not be growing quite as rapidly. Such that they’re raising equity capital. And we really, as growth debt investors, we’re looking for companies that are really high quality companies, but still are, are not just raising equity capital. They wanna raise debt capital. Mm. And that’s very much a relevant type of company for us.
Mm-hmm. Where they’re not thinking, okay, we are growing very rapidly. We’re gonna raise capital at very high equity valuations. But we also wanna raise growth that capital, and that has, I would say, created customer demand, you know, for lenders and investors to be able to invest in those companies. I would also say one other trend is that the banks have gotten very involved in this market.
There’s a lot of banks now in, especially post SVB, where a lot of professionals have gone to great banks, and so there’s now a lot of players on the bank side. Mm-hmm. You know, they are focused on bringing over deposits. They’ll provide debt facilities that are efficient as in the costs are less because they can also bring over deposits.
They’re really looking to provide a full service, full set of services to these companies. But they’re also more the investor fund type investors like ourselves, non-bank growth lenders that are looking to provide capital purely without bringing over deposits. So it is, it’s two different types of providers of debt capital in this market that have evolved over time.
And I would say they’re both. Fairly robust right now as where we’re in the market. I wanna spend some of the time that we have here, and I wanna get into a little bit further into what you’re doing at Orex Growth Capital. And I understand that a big part of what you’re doing is on the growth capital side of it, but maybe just give us an overview overall of the company and what you do.
Sure. So Orex itself is a very, very large Japanese global investment firm. Over 30,000 employees, over 20 billion market cap. There’s a lot of different operations at Orx. Orx, USA is a subsidiary of overall Orix. Overall. Orix in Japan is a, a large private equity investor, a lessor financier of, of companies globally.
ORX, USA itself has a number of different business lines, private credit, private equity, and also commercial real estate. The Growth Capital Group sits within private credit. Within the os USA sub and our group has been providing growth capital to the tech industry now for over 20 years. Invested in over 200 companies.
So it’s been a stable, long-term provider of capital to this segment. Well, before I joined, since I basically entered this entire industry, and I would say the focus is finding. Recurring revenue stable provider of mission critical products to customers, very much in the software tech enabled services, digital infrastructure sectors.
And our core focus is growth, debt and, and also structured equity as we’re looking to support these companies in their growth. And we’ll sometimes invest in the growth equity rounds of the companies too. Yeah. And typically we’re investing 10 to $50 million end up for investment. How does Orex leverage its long-term presence in the market to approach, I don’t know, maybe the current market or just market risk in general, like, like how does that work?
I think that’s a very important question as to how people approach this, because technology and tech growth and the entire industry is not without its ups and downs. You know, entrepreneurship itself is, is not easy and in in any path. Has its ups and downs in the market. Yeah. And as a result, it’s really important to find capital partners that are gonna stick with you.
You know, some approaches are a little bit less, you know, Hey, listen, if you’re not succeeding every single quarter, oh my gosh, you know, it’s not, you know, we’re not gonna be supportive in the short term. It’s really important to find partners that are gonna be supportive over the long term, because it’s a long journey.
Yeah, sometimes it could be 10 plus years from early stage company, and when the IPO market is slower, it could be. A long time, even for mature companies. Mm-hmm. And so I would say that it’s really important to find partners that are long-term in nature. And I think that’s something that’s important here.
It’s when we’re speaking with companies and they wanna know like, who are you and where’s your capital coming from? Yeah. And then how have you behaved in situations where, you know, there’s been macroeconomic economic cycles or we hit a speed bump? There’s been a lot of examples over those 200 companies where.
ORs in particular, has been supportive of these companies. Mm-hmm. Growth, expanding and giving more money if they’re doing well or if they’re not doing well. Supporting those companies through those road bumps. I think that’s really important. So the, you know, I think this market over time has been one where, you know, the participants that have been supported to the ecosystem are ones that have continued to grow and thrive Yeah.
In order to be successful in this market. And I think that’s important part of how this group here operates. Hmm. Amazing. Well, Benjamin, this has been, I mean, I’ve learned a lot today about current market trends. I know it’s excited about the upcoming venture debt conference, half desk. What’s next? I mean, what’s next for you?
What’s next for Orx and the company? What’s next? Yes. So I think for ORs and Company, this group is growing. It’s remains very committed to this market. You know, we’ve got a sizable balance sheet. Oracle overall has a hundred billion plus balance sheet. And so there is there’s, there’s balance sheet capital, third party capital that is dedicated towards supporting this effort and this market.
For me personally, you know, I’m kind of a, a, a creature of habit. You know, I’m not gonna mention my age, but x number of years ago, some may say decades ago, I was like loving tech and I just don’t think I will ever leave it. And so my, my, my goal is to either be investing in building. And supporting interesting technology businesses for my career.
And I think, I think this new AI revolution is incredibly fascinating and we’ve already made an AI investment early this year and I’m just super excited to be part of what I think will be quite transformative for us and also global society, humanity, frankly. And I, you know, if, if we go on that tangent, I could talk your ear off probably too long.
But I think it’s a very, that’s par partially why I’m so interested in being in tech. Yeah. Um, more recently because I think this new evolution is gonna be quite fascinating. Hmm. How do people follow up? How do they learn more about Orx and, and, and how do they connect? Yes. Please reach out. My email address is be my name, Benjamin dot wu@orx.com and that’s, that’s the best way to reach me.
I, I would give my phone number, but there’d be so many people excited about this topic. Yeah. Fantastic. And for everybody listening, just so you know, of course we’ll have links in the website, all the website, all that other good stuff in the show note, if this is your first time with Mission Matters and you haven’t done it yet, hit that subscribe or follow button.
This is a daily show. Each and every day we’re bringing you new content, new ideas, and of course, new content for your life. So, hit that, subscribe or follow button and Benjamin. Thanks for coming on the show. Thanks for having me.