Alteria Capital Marks First Close Of INR 1,000 Cr Venture Debt Fund

As venture debt gains traction in the Indian startup ecosystem, Mumbai-based Alteria Capital has announced the first close of its INR 1,000 Cr debt fund with participation from large family offices, senior professionals, founders, and other stakeholders from the startup ecosystem.

The firm received the approval of the Securities and Exchange Board of India (SEBI) for its third fund of INR 1,000 Cr fund, with a greenshoe option of INR 1,000 Cr, in the last quarter.

The company claimed that it is India’s largest venture debt provider with the first close of the third fund as it sits on an AUM of INR 3,800 Cr. Its Fund I had a corpus of INR 975 Cr and Fund II had a corpus of INR 1,800 Cr.

The third venture debt fund, named Alteria Capital Fund 3 Scheme A, will continue to back early and growth stage startups that have already raised VC funding. It will provide a range of speciality debt solutions, with cheque sizes up to INR 150 Cr.

The sector-agnostic debt fund will focus on consumer, tech and healthcare startups, especially those that have heavy domestic consumption. 

Besides, there will be a separate scheme within the fund to provide working capital solutions to startups, Alteria Capital said in a statement.

“The working capital solution is intended for the same universe of companies we cater to from our existing funds – venture-backed Indian startups. This solution is to meet their short-term balance sheet requirements while venture debt can be used for medium-term needs such as capex, brand marketing, acquisitions, global expansion or runway extension,” Vinod Murali, cofounder and managing partner of Alteria Capital, told Inc42.

Founded in 2017 by Murali and Ajay Hattangdi, Alteria Capital has so far backed over 100 startups. Its portfolio includes foodtech startup Rebel Foods, ecommerce rollup startup Mensa Brands, D2C startup Good Glamm Group, B2B marketplace Jumbotail, and edtech platform Sunstone Eduversity. 

Venture Debt Slated For Growth Amid Funding Winter 

Despite some resistance in the startup ecosystem, the venture debt funding ecosystem is coming of age in the country. 

Punit Shah, Alteria’s managing partner, said that the venture debt asset class in India is a relatively younger market compared to its global peers, and this offers a significant opportunity for raising and deploying capital. 

“Debt has always been a supplement to equity and will continue to be the same. However, the awareness is at an all-time high and most founders are now keen to explore some debt with their rounds so the proportion of companies which are looking to include some debt as part of their rounds is rapidly increasing,” Shah added.

According to market research firm Venture Intelligence, the first six months of 2022 saw Indian startups attract nearly $290 Mn in venture debt funding, and this may cross $1 Bn by year-end. 

Considering the fact that Indian startups had raised $19 Bn in equity funding in the first half of 2021, venture debt lags considerably behind.

The ongoing funding winter is further expected to give a fillip to venture debt funding as startups look for alternative sources of finance to stay afloat.

As venture capital firms in India are currently sitting on dry powder worth nearly $16 Bn, Alteria’s managing partner Ankit Agarwal expects an increase in venture debt funding levels over the next 12-18 months.

“Our credit risk mitigation strategy has worked well so far with zero losses in our existing funds,” he said. “While there is some pressure on funding and especially on valuation, there is still reasonable momentum for good performing companies.”

Alteria’s third fund competes with the likes of BlackSoil’s INR 250 Cr fund, Anicut Capital’s INR 875 Cr fund, and Trifecta Capital’s INR 750 Cr fund.