Venture Capital Funding For Startups Hit A Record High In 2019

A funding boom of 72 per cent was observed in the Indian startup ecosystem over the last 3-5 years. The venture debt’s contribution to fueling the funding spree has increased considerably with tremendous growth in deployment by specialized firms. 

According to the Venture Intelligence Data, venture debt funds raised by local startups soared to $215 million in 2019 from $125 million in 2018. 

In 2017, Indian startups managed to rake in $91 million across 35 deals and gathered $63 million and $38 million from 63 deals in 2016 and 2015 respectively. Collectively, in the last 5 years, over $530 million in debt has been deployed across around 234 deals.  

Alteria Capital, Innoven Capital and Trifecta Capital who support some distinguished companies like Paytm, Rivigo, Urban Company, Cure.fit, CarDekho, BigBasket, Swiggy, Oyo, PharmEasy, Dunzo, Cars24, NoBroker, and others seem to majorly influence the likes of the venture debt market, which has gained traction in the last decade. 

Venture debt, a more mainstream option for startups, is seeing traction for both early-stage firms and unicorns. Unicorns is an industry name for start-ups that value over $1 million. 

2019 seemed as an investing  year for these firms as they deployed around $215 million across growth-stage start-ups. In July last year, BigBasket picked up Rs 100 crore as debt from Trifecta, whereas Alteria Capital put Rs 80 crore in Lendingkart at the same time. Some notable debt funding rounds include task management firm Dunzo and health-tech company mFine who raised over Rs 30 crore respectively. 

An umpteen number of funds are setting up their practices owing to the growing demand for debt in the Indian market today. The demand for debt funding has continued in 2020 as well. Companies such as fashion brand FabAlley raised Rs 8 crore from Trifecta, while Dunzo cornered $11 million. Cloud-kitchen major Rebel Foods secured Rs 35 crore from Alteria followed by Rentomojo which raised Rs 15 crore. 

Venture debt is being seen as an excellent way that founders favor as it provides growth capital to extend the cash runway while minimizing equity dilution. A host of new funds are coming up to cater to the growing demand, apart from those which already exist. 

Mumbai-based IvyCap Ventures, Stride Ventures, Ankur Capital, and Unicorn India Ventures are eyeing to create debt funds. Last year Sachin Bansal’s Navi Technologies had also done a few venture debt deals  including Rs 20 crore in consumer audio brand boAt and Rs 10 crore in Bounce.  

Considering that debt financing compliments equity financing, it would be engaging  to see capital deployment by venture capital funds and in turn, the strategy followed by debt funds.