The Indian Angel Network has announced a partnership with Indifi Technologies to launch a Growth Stage Debt Fund to help IAN portfolio companies get working capital.
The companies said through this fund, startups will be able to avail debt in the range of INR 10 Lakh- INR 2 Cr based on the revenue pattern of the business and will benefit startups with no equity dilution or other equity-related rights for the lender. They added that depending on product structure and growth periodicity of business, loan repayment duration will range between 18-36 months.
Indifi aims to provide growth debt capital to support startups to pull through the slowing economy and continue their business operations. IAN is looking to continue to help its portfolio through mentorship, guidance and support.
Alok Mittal, CEO and MD, Indifi Technologies said, “The idea behind this partnership is to create a support system aimed at accelerating the growth trajectory of new-age startups looking to adapt and excel during these difficult times.”
The debt fund will provide support to startups across SaaS, direct-to-consumer online brands, enterprise services, edtech, digital media/advertising-driven businesses and leasing businesses.
Padmaja Ruparel, cofounder of Indian Angel Network said, “Several startups with a sound business model are struggling to keep up with their working capital needs due to a sudden impact on their business induced by Covid-19. We felt there was a requirement of a financial facility that addressed the needs of startups that did not want to dilute their equity at the moment.”
Some of the other criteria for funding are:
- B2B startups applying for a loan should have minimum recurring revenue of over INR 10 lakh per month
- Startups operating in B2B space should have a recurring revenue of over INR 5 Lakh a month
- The eligible startups should also have at least 12 months of stable revenue history
- The sanctioned amount of loan would be equivalent to 2-4X of monthly revenue, depending upon the margin profile of the business
- Those businesses hit by Covid-19 should have had high growth rates in the range of 40-50% or more in the normal course of business
Earlier in January, IAN signed a memorandum of understanding (MoU) with Caspian Debt to bring larger fund access to early and growth-stage startups.
Debt funding is similar to a bank startup loan to raise capital, which brings individual or VC investors a steady interest from the borrowing business along with a structured repayment plan. As per Datalabs by Inc42, despite the availability of private debt instruments such as convertible notes, venture debt remains the most preferred mode of debt investment into Indian startups. In the context of the funding amount, venture debt makes up approximately 99% of the total $3.67 Bn, similarly in the case of funding deals its contribution stands at 97%.