SIDBI Enters Venture Debt Space, Made 4 Investments

Small Industries Development Bank of India (SIDBI) has entered into the venture debt space. The body has also made four debt investments in this segment, shared Sivasubramanian Ramann, chairman and managing director of SIDBI. 

Attending the IVCA Conclave 2023, Ramann talked about SIDBI’s current plans by saying, “Along with equity investments, we are talking about the ability to provide debt. Many banks, even today, are not in a position within their straitjacket to provide debt to companies. So, SIDBI has gone into what is known as venture debt. It is very small beginnings, but I think we have done about four investments, and this we are doing with the partnership that has grown amongst all of you.” 

For the debt investments, SIDBI has partnered with a few funds, as per the managing director. 

During the event, Ramann urged VC funds to consider early-stage investing to a greater extent. He said, “When you are already straddling the space of startups, where you are talking about series A and upwards, are you also willing to look to come up to the early stage more easily?”

Importantly, the event was attended by veterans of the private equity and venture capital industry. 

Further sharing on SIDBI’s initiatives to support India’s startup ecosystem, Ramann said, “We have talked to several incubators around the country, whether incubation is something we need to grow more, we need to take that up in a bigger way, or is there a consolidation that is expected to happen. Because I was told that there were over 200 incubators in this country, and we probably don’t know what’s happening amongst them, but this all adds up to the startup space.”

SIDBI, which is the Centre’s financial institution, was founded in April 1990 under an act of the Indian parliament. It aims to promote, finance and develop the MSME sector and also, coordinate with institutions with similar objectives. 

Sometime back, the government’s financial institution shared that the MSME segment will act as a strong underpinning to recover the country’s economy. 

It further shared that it aims to increase its balance sheet to INR 5000 Cr in the next two years and offer financial assistance to MSMEs in line with the Centre’s mission of making the country a $5 Tn economy. Some of the lending platforms or tools launched by SIDBI include PSBLoansin59minutes, the Receivables Exchange of India (RXIL),  GST Sahay and the MSME Formalisation Project. 

SIDBI’s coming into the venture debt space has come at a time when the country’s startup ecosystem is going through a year-long funding crunch. Owing to which, homegrown startups could raise $25 Bn funding in 2022, witnessing a dip of 40% as compared to the previous year. Seed-stage startups grabbed the attention of investors last year, while growth and late-stage startups saw correction, according to the Inc42 funding report. 

In an attempt to keep up with such unfavourable conditions, startups adopted massive cost-cutting measures including pivoting business models, restructuring operations and laying off employees. 

As per Inc42 layoff tracker, more than 22K employees have been laid off by Indian startups since January last year.