Decoding Venture Debt Funding For Startups

SUMMARY

Indian startups raised about INR 4,500 Cr of venture debt in 2021. For an asset class that is seen as the new kid on the block, this is more than twice the previous high

This year saw more than 100 companies raise venture debt, including Mensa Brands, Urban Company, Licious, and Zetwerk, with ticket sizes ranging from $2 to $25 Mn

Venture debt can be an effective tool for growing your startup faster than you could without it. Its non-dilutive nature and timely convenience makes it an option worth considering for your startup

Indian startups raised about INR 4,500 Cr of venture debt in 2021. For an asset class that is seen as the new kid on the block, this is more than twice the previous high. Companies went on a buying spree and investors raised larger funds. This year saw more than 100 companies raise venture debt, including Mensa Brands, Urban Company, Licious, and Zetwerk, with ticket sizes ranging from $2 to $25 Mn. 

In recent years, venture debt has become more integral to a startup’s fundraising strategy. However, as the venture equity market dries up and valuations of tech stocks in the public markets are down upto 70-80% from their peak, venture debt is becoming a much more sought after funding solution for startups looking to extend their runway. The choice for startups in the current environment is simple — do a down round where they raise additional equity at a significantly lower valuation from their last round and dilute heavily or raise venture debt where the equity kickers are struck at their last round valuation.

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