Bengaluru: InnoVen Capital India, a venture debt firm backed by Singapore’s state-run investment arm Temasek Holdings Pte. Ltd, nearly doubled its investments in Indian start-ups in the quarter ended 30 September to $20 million, from $12 million in the June quarter, signalling growing appetite among start-ups for venture debt at a time when equity investors are becoming increasingly cautious.
Between July and September, InnoVen Capital participated in 15 deals including fund raising by online hotel aggregator Oyo, food and beverages company RAW Pressery, online furniture rental platform Rentomojo, budget hotel chains Treebo and Fab Hotels, food tech start-ups HolaChef and Faaso’s, cashback app Crownit, online fashion store Voonik and online jewelry store Bluestone, among others.
“This is the best ever quarter for us in terms of number of deals and quantum of funds as well. We have been doing some larger deals. Some of these companies raise large chunks of equity, so we also go up to $5 million in those cases,” said Vinod Murali, managing director at InnoVen Capital India.
The firm has been particularly bullish on segments such as hotels, healthcare and education in the recent past. For instance, InnoVen has backed start-ups such as Oyo, Treebo, Fab Hotels and Stayzilla in the hotels segment, Byjyu’s, Simplilearn, Embibe and Toppr in the education space and Practo and Portea in the healthcare segment.
The firm aims to disburse about $60-65 million in venture debt in 2016. It typically loans $500,000-5 million to companies that have raised at least one round of funding from venture capital firms. InnoVen charges an interest rate of about 15% from the investee companies per annum.
In 2015, InnoVen loaned Rs.275 crore to 27 start-ups.
In April 2015, Temasek Holdings acquired the Mumbai-headquartered SVB India Finance for an estimated Rs.300 crore, and renamed it InnoVen Capital.
As equity funding dries up, India’s start-up ecosystem has seen the emergence of a business opportunity for firms in the venture debt business, Mint had reported on 17 February. Interestingly, not only early stage companies, but mature start-ups such as Byju’s, Urban Ladder and Oyo among others, which have raised anything between $75 million and $160 million from venture capital firms, have also opted for venture debt.
“More mature companies have specific end uses. Within a business, you have multiple smaller business segments. So, if you can have financing for a particular division or an idea or an experiment that a founder wants to pursue, it is easy to understand whether that particular segment is doing well because there is a clear allocated cost to it with venture debt. Then there is a story around marketing. A lot of the businesses use venture debt to invest in marketing,” said Murali.
Trifecta Capital, another venture debt firm, has raised more than Rs.200 crore from investors including RBL Bank Ltd, while IntelleGrow raised about Rs.134 crore from Developing World Markets and Omidyar Network.
Venture capital (VC) investment in India plummeted 58% in the June quarter over the previous three-month period, according to a July report by KPMG and CB Insights. VC firms ploughed $583 million into India in April-June, down from $1.4 billion in January-March, said the report.