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Mumbai-based venture debt fund, Innoven Capital, has decided to extend the amount of loan that it lends to early stage startups.
It plans to lend over $67.6 Mn (INR 460 Cr) to early-stage companies this year, continuing with its sector-agnostic approach.
Vinod Murali, managing director of InnoVen Capital said, “We’ve partnered with most of the active venture equity funds in the country. We typically co-invest along with these funds or follow an equity round. Our funding pipeline is pretty strong this year and though we continue with the sector-agnostic approach but will specifically look out for technology, education and healthcare startups.”
The fund has allocated about 20% amount to be disbursed to healthcare and 10% each to education and analytics-based startups.
Started in 2008, InnoVen Capital, is positioned as India’s first and only specialty lending business targeting high growth entrepreneurial companies in India, backed by top-tier venture capital and private equity investors. Formerly known as SVB India Finance, it was rebranded as a result of being acquired by Temasek Holdings in 2015. The fund has disbursed startup loans worth $49.2 Mn (INR 335 Cr) across 30 transactions in 2015 alone. It has invested in startups Byju’s Classes, Portea, Capillary, Practo, Collectabillia (Wrogn), MobiKwik, MoveInSync, Faasos, Toppr, Embibe, SuperProfs, Edusys Global, AppsDaily and Power2SME.
According to Murali, startups are keen to include debt in their capital structure which they mainly use for marketing and other promotional expenses. However, sometimes, the debt financing is also used for acquisition and funding working capital. He added, “With a good capital mix including venture debt and equity, startups have a longer runway to grow their business with minimal dilution. It also ensures that they are not running on fumes by the time they get to the next fundraise.”
InnoVen lends money at about 15% (interest cost) per annum. The fund also asks for a 1-1.5% equity kicker. This means that to raise an amount of INR 15 to 25 Cr, a startup will have to dilute just 1%, which otherwise is close to 10%, in equity dilution.
Apart from an equity capital base of $200 Mn (committed by Temasek and UOB Singapore), the fund has raised $25 Mn to meet this year’s demand for startup loans.
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