Urban Ladder Goes The Debt Financing Way, Raises $3 Mn From Trifecta Capital

Online furniture retailer Urban Ladder has raised $3 Mn in venture debt from Trifecta Capital.

According to documents filed with the Registrar of Companies, the investment came in June this year. The investment is done against the issue of non-convertible debentures and compulsorily convertible preference shares.

The compulsorily convertible preference shares are the ones that have to be converted into ordinary shares after a predetermined date.

On the condition of anonymity, a source close to the development said, “Debt capital makes sense given the cost of capital is lower. Every time you raise equity, you dilute stake and you can’t recoup that ever. Debt is far cheaper. Only thing about debt is, you have to be confident of your repayment ability. It will give the company an additional runway of three to four months. Now, will that additional runway of four months help the company grow the business by an additional 30%? If that additional growth helps improve your valuation and avoid dilution of stake, that is a good enough value you have generated.”

Debt financing occurs when a firm raises money for working capital or capital expenditures by selling bonds, bills or notes to individuals and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and the principal and interest on the debt will is repaid later.

Urban Ladder is one of the most well-capitalised online furniture businesses, backed by Ratan Tata, Sequoia Capital, Steadview Capital, SAIF Partners and Kalaari Capital.

Till date it has raised about $77 Mn. It competes with Pepperfry (Trendsutra Platform Services Pvt. Ltd) and Fabfurnish.

Pepperfry has raised $128 Mn so far from Goldman Sachs, Norwest Venture Partners and Bertelsmann India Investments, among others. In April 2016, Kishore Biyani-led Future Group acquired Rocket Internet-backed online furniture startup FabFurnish.

Prior to this, Delhi-based B2B online marketplace for industrial material, Industrybuying.com, raised $1.7 Mn (INR 12 Cr) from venture-debt provider Trifecta capital.

The development was reported by Livemint.