Key Takeaways
- • Institutional investors have deployed trillions into private credit and infrastructure, yet capital-intensive hardtech ventures struggle to access that capital once their technology is proven, according to a World Economic Forum article.
- • Private credit assets under management are projected to approach $3 trillion by 2028, according to Preqin estimates cited by the WEF.
- • Asset-based financing can shift underwriting from enterprise growth projections to the cash flows and collateral value of specific assets, offering contractual returns rather than speculative equity upside.
- • Three structural barriers have limited adoption: standardization, transaction costs and risk translation between founders and lenders.
- • Hardtech companies are debt-ready when deployments are repeatable, revenues are predictable, assets retain residual value and operational reporting is mature.
Summary
A World Economic Forum article argues that venture capital has built much of the technology needed for the decade's defining challenges, including compute infrastructure, energy systems, food systems and advanced manufacturing, but that asset-based finance is needed to scale its physical deployment. The piece notes that data centres, batteries, robotics, electrolyzers, transmission lines and production facilities already exist in technological form, and that the bottleneck is increasingly one of deployment rather than invention.
The article cites Preqin estimates that private credit assets under management are projected to approach $3 trillion by 2028, reflecting rapid growth in non-bank lending over the past decade. Pension funds and insurers continue to expand allocations to infrastructure and private debt in search of yield, duration and diversification. Despite this capital availability, many hardtech startups find the financing path from proven technology to large-scale deployment unclear, and tend to rely on venture capital and equity markets rather than securitization-style structures used for assets such as real estate and vehicles.
The WEF argues that continued reliance on successive equity rounds becomes inefficient and dilutive once a company is deploying repeatable, revenue-generating assets, because scaling physical infrastructure requires upfront capital for each additional unit. Asset-based financing, which is already used in transportation, real estate and energy infrastructure through instruments such as securitized solar power purchase agreements and auto loan asset-backed securities, shifts underwriting toward the cash flows and collateral value of specific assets. The article identifies three barriers to broader adoption in hardtech: standardization, transaction costs for smaller deployments, and the gap between founders' focus on technological breakthroughs and lenders' focus on collateral recovery and covenant protection.
The article attributes growing feasibility to higher interest rates that have compressed venture valuations, industrial policy such as the US Inflation Reduction Act and the EU Green Deal Industrial Plan, and improved digital reporting tools. It sets out criteria for debt readiness: repeatable deployments, predictable contracted revenues, residual asset value and operational maturity. It cautions that premature debt can constrain growth through covenants, while delay can cause unnecessary dilution. The WEF also points to supra-sovereign guarantees, insurance solutions and incentive schemes as levers governments could use to improve the risk profile for allocators. The authors conclude that the constraint is less technological or financial than structural, and that investor mandates and underwriting frameworks must evolve to meet industrial scale-up demands. The article represents the views of its author rather than the WEF itself.
The article cites Preqin estimates that private credit assets under management are projected to approach $3 trillion by 2028, reflecting rapid growth in non-bank lending over the past decade. Pension funds and insurers continue to expand allocations to infrastructure and private debt in search of yield, duration and diversification. Despite this capital availability, many hardtech startups find the financing path from proven technology to large-scale deployment unclear, and tend to rely on venture capital and equity markets rather than securitization-style structures used for assets such as real estate and vehicles.
The WEF argues that continued reliance on successive equity rounds becomes inefficient and dilutive once a company is deploying repeatable, revenue-generating assets, because scaling physical infrastructure requires upfront capital for each additional unit. Asset-based financing, which is already used in transportation, real estate and energy infrastructure through instruments such as securitized solar power purchase agreements and auto loan asset-backed securities, shifts underwriting toward the cash flows and collateral value of specific assets. The article identifies three barriers to broader adoption in hardtech: standardization, transaction costs for smaller deployments, and the gap between founders' focus on technological breakthroughs and lenders' focus on collateral recovery and covenant protection.
The article attributes growing feasibility to higher interest rates that have compressed venture valuations, industrial policy such as the US Inflation Reduction Act and the EU Green Deal Industrial Plan, and improved digital reporting tools. It sets out criteria for debt readiness: repeatable deployments, predictable contracted revenues, residual asset value and operational maturity. It cautions that premature debt can constrain growth through covenants, while delay can cause unnecessary dilution. The WEF also points to supra-sovereign guarantees, insurance solutions and incentive schemes as levers governments could use to improve the risk profile for allocators. The authors conclude that the constraint is less technological or financial than structural, and that investor mandates and underwriting frameworks must evolve to meet industrial scale-up demands. The article represents the views of its author rather than the WEF itself.
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