Venture debt has picked up traction in the Indian startup ecosystem, especially post the funding boom in 2015. With the traditional banking route becoming difficult for venture-backed startups — due to the inability to provide collateral and positive cash flow — venture debt in India provides an alternative financing model to startups majorly dependent on venture equity-based funding.
In the rising ecosystem, Temasek-owned InnoVen Capital has now raised INR 740 Cr ($100 Mn) towards the first close of its new independent fund. The target corpus of the fund is INR 1,000 Cr, and it has a green-shoe option to raise an additional INR 1,000 Cr.
The anchor investor for the stage agnostic fund is Innoven Capital Pte Ltd — a joint venture of Seviora (Temasek) and United Overseas Bank. It will primarily focus on sectors such as consumer internet, B2B commerce, enterprise software, fintech, healthtech and logistics.
“With record fundraising and a vibrant IPO market, we expect a multi-fold increase in the formation of new startups, which will lead to higher demand for venture debt in the future. Venture debt is now an integral part of financing rounds and founders have a good appreciation of the product. We have built a robust pipeline and expect to start disbursing from the fund soon,” said Sameer Mansukhani, a partner.
According to an Inc42 report, the Indian startup ecosystem is home to approximately 119 unique investors who participate in debt funding rounds, but there are only a handful of pureplay venture debt firms including InnoVen Capital, Trifecta Capital, Alteria Capital, Blacksoil and Stride Ventures.
In Q1 2021, InnoVen was the top fund, backing 12 startups, a step ahead of Sequoia. According to the firm’s website, it has backed over 225 startups, including edtech BYJU’s & Eruditus, foodtech Swiggy, Chaayos & Chai Point, fintech BharatPe, healthtech 1mg, IPO-bound hospitality startup OYO, and wellness startup cult.fit.
“India is now home to 50+ unicorns and the third-largest venture ecosystem globally. Over the years, we have been fortunate to partner with some of the best founders and startups, including 17 that have achieved unicorn status. Our portfolio companies have raised over $20 Bn of external capital and are now valued at over $70 Bn,” said Ashish Sharma, managing partner. He added that InnoVen is also looking at bringing other investors to the fund.