If you look at the portfolio of many private credit firms you’ll notice they like to invest in certain industries, specifically healthcare, business services, and tech.

But few firms have a dedicated tech investment team like Blue Owl, which operate a tech-focused BDC.

So 9fin sat down with the private credit firm’s co-head of technology investing Erik Bissonnette to talk about how the market continues to grow, underwriting trends, and why software is not really an industry unto itself.

1. Tech lending is so big, the definition often varies. How do you define tech lending and what are the biggest areas of growth for this year?

Worldwide IT spending continues to grow in the high single digits, with industry experts roughly sizing the market at around $5trn (Gartner 2024). Inside of that category, our focus has always been primarily on software. In addition to its size, estimated at a $1trn-plus market on its own, we believe the category offers superior business quality and risk-adjusted returns. Our investment thesis is centered on lending to companies that sell mission-critical applications to its users. These solutions are essential to an organization’s core functions and operations. As a result of this business dependency, we believe these companies have attractive financial profiles — recurring subscription revenue, high retention rates, strong gross and operating margins, and minimal capital intensity. This combination of factors may lead to stable and predictable performance, which is ideal for us as a lender.

In terms of growth for this year, we expect continued advancement of AI as an intelligence function embedded into enterprise software packages. We have observed a mass democratization around development and security with the adoption of copilots. But we don’t think this is a trend limited to engineering resources or citizen developers. Our companies continue to embed AI into their existing products, which over time will fundamentally change business operations. As these tools learn from usage, entirely new uses cases and productivity enhancements can be generated from the corpus of an organization’s data assets.