As capital continues to flood the space, competition is intensifying, deal complexity is rising, and managers are looking for any edge to improve speed, efficiency, and risk management. Private credit has been a highly relationship-driven and manually intensive business, but firms are increasingly turning to technology to streamline operations across the deal lifecycle.

The biggest pain points include better portfolio monitoring and reporting to LPs, more efficient deal execution, and faster diligence and investment decisions. With private credit firms competing on speed, execution, and deal quality, the opportunity for software solutions has never been bigger.

A Market Growing—And Consolidating
Private credit’s rise was fueled by post-GFC banking regulations that forced traditional lenders to pull back from corporate lending, leaving a gap that private debt funds eagerly filled. Now, with demand for corporate lending vastly outstripping available capital, the sector remains attractive.

While there are over 1,000 private debt funds globally, the sector is heavily concentrated, with the top 50 firms accounting for 91% of all capital raised in 2023. This has led to a rise in “club deals,” where multiple lenders share exposure to a single borrower, further complicating deal execution, monitoring, and interconnectedness in the ecosystem.

At the same time, investors are doubling down on private credit. CalPERS said it would increase its private-debt allocation from 5% to 8%, totaling $40 billion. Connecticut Retirement Plans and Trust Funds plans to double its private credit allocation to 10% by 2027, and the Alaska Permanent Fund is raising its private-credit allocation from 9% to 11%. As Bloomberg’s Matt Levine puts it, “You have to do so many deals to keep up, and they can’t all be good.”

Where Private Credit Needs Tech the Most
Private credit has grown so fast that it is just now catching up on software adoption to modernize its internal tech stacks. As deal volume and complexity rise, firms are reassessing their reliance on Excel, email chains, and manual processes.

Better Portfolio Monitoring: Automating Risk Management

This is where private credit needs software the most—and where adoption is already happening. Tracking borrower performance, covenant compliance, and portfolio trends is incredibly manual, often requiring dozens of analysts pulling data from PDFs, spreadsheets, and scattered reports. The value here is not just in better health monitoring of one’s portfolio but also in the ability to quickly package information to LPs as needed.

Allvue and iLevel have built strong businesses here, but we believe there is an opportunity for a new, more modern set of solutions like Lumonic and 73 Strings to tackle this challenge. Portfolio management tech is quickly becoming table stakes for firms managing billions in loans. Additionally, increasing regulatory scrutiny and transparency requirements will only reinforce the need for better portfolio reporting solutions.

Smarter Deal Execution: Fixing the Syndicate Mess
As “club deals” increase, managing large syndicates, compliance, and funding logistics can be a nightmare. Startups like PactFi and Termgrid are building syndication collaboration platforms to streamline deal closing, as many firms still rely on email, SharePoint, and traditional back-office systems. This solves a key pain point for large firms that primarily work as lead arrangers on large syndicated deals, but without widespread industry adoption, the process will remain messy and fragmented.

Faster Investment Decisions: AI for Diligence
Private credit firms sift through massive amounts of unstructured data—company financials, investor presentations, and legal documents—to assess opportunities. AI copilots could drastically reduce time spent on data extraction, financial analysis, and memo drafting.

Startups like Hebbia, Arkifi, Blueflame, and Arc are tackling this, and firms are intrigued to trial their capabilities, but widescale adoption remains slow due to firms’ caution in fully trusting AI-generated insights for underwriting. AI copilots may be promising, but full-scale adoption will take time. We explore the reasons why in a separate article.

So What’s Holding the Market Back?
Despite the clear need for technology, several hurdles slow innovation. Many firms, especially larger ones, have heavily invested in internal systems, making them reluctant to switch. Not to mention, earlier, less successful iterations of software innovations left many firms skeptical of new vendors. Additionally, enterprise sales cycles combined with potentially long implementation timelines (depending on the type of product) in this space could further delay adoption.

Where Founders and Investors Should Be Focused
From a VC perspective, private credit technology is a massive untapped market, but solutions need to be painkillers, not vitamins. The strongest opportunities lie in AI-powered portfolio management, next-gen deal execution platforms, and vertical SaaS solutions tailored for private credit. Firms that can automate financial spreading, improve risk assessment, and streamline LP reporting will see faster adoption. Meanwhile, a dominant player in syndicate collaboration could drive industry-wide change if they win over Tier 1 firms. The market is also primed for an integrated operating system that seamlessly connects diligence, deal execution, and portfolio monitoring.

Private credit isn’t slowing down, but the firms that embrace technology will have the edge in underwriting, execution, and risk management. The next decade will separate tech-enabled lenders from those stuck in manual workflows. As a venture investor, we’re watching this space closely.

If you’re building in private credit tech, reach out. We’d love to chat.