Mumbai-based VC fund Unicorn India Ventures announced the launch of its second fund, a venture debt fund with a corpus of $92.3 Mn (INR 600 Cr), earlier this week. While the year has seen the launch of a couple venture debt funds in the Indian startup ecosystem, Unicorn India’s venture debt fund aims to fill in one important missing piece in the Indian startup ecosystem.
And that piece is the availability of venture debt for Indian startups.
M Damodaran, Chairman, Unicorn India Ventures, and former chief of the capital markets regulator Securities and Exchange Board of India (SEBI) spoke at length about this gap. Touching upon the fact that while creation of jobs as an outcome of direct economic growth is not taking place, on the positive side, people are thinking more in terms of creating opportunities for self-employment. This enthusiasm has also been matched by the shared optimism of people willing to write out cheques in order to ensure that those dreams turn into reality. However, there is another missing piece here.
“That missing piece is the fact that these startups while do get funded, it is mostly by way of private equity, leading of course to dilution of ownership, which is not something young people are happy with. When you have an idea, you want to run with it; you don’t want to share the spoils too early in the journey. The missing piece is venture debt,” he added.
Damodaran further stated that venture debt is not something totally new. The recognition that venture debt is important has existed for a while now. However, what has not kept pace is the fact that providers of this instrument are not as many as they should have been, certainly within India. And it is into that space that Unicorn India Ventures is now stepping with its Venture Debt Fund.
“We need to address the gap in funding options. Venture debt is a space that is not yet occupied by a large number of people. We are among the early birds,” he added.