Mumbai: Singapore’s Temasek Holdings-backed venture debt provider InnoVen Capital sees a major opportunity for follow-on investments in the venture debt market as growing startups seek to diversify their funding requirements, said a senior executive of the firm.
InnoVen Capital, one of the handful of venture debt providers in India, has been increasing the pace of follow-on investments to support its portfolio companies. The company invested ₹ 138 crore across 11 follow-on transactions in the first half of 2018, a 350% jump from the previous year, which saw investment of ₹ 37 crore across four follow-on transactions, the company said.
Follow-on financing transactions of InnoVen this year include Power2SME, Chaipoint, Capillary, Treebo, Bizongo and Epigamia.
According to a senior executive of the firm, the ability to provide follow-on financing is an important criterion for start-ups to partner with venture debt providers.
“While we continue to fund new and innovative start-ups, we are also focused on doing more with our portfolio companies as we continue to be part of their growth journey. We recognized that start-ups are increasingly looking for venture debt partners that can not only add value but also have an appetite to provide follow-on financing through the life cycle," said Ashish Sharma, chief executive at Innoven Capital India.
Follow-on financing particularly fits us well, as we have a large, well-diversified portfolio and strong relationships, which is a source of strength for our franchise.
“We would have done a very high proportion of all follow-on funding transactions that happen in the venture debt space and the pace of follow-on investments this year is already twice the pace of last year," Sharma added.
InnoVen first funded the enterprise technology company Capillary Technologies in 2013. Since then, InnoVen has done multiple follow-on venture debt transactions with Capillary, including one in the last year and one this year.
“As we get closer to being cash positive, debt is becoming a viable alternative to equity. InnoVen has been a great partner in our journey providing us debt capital through different stages of our growth and opening doors to their strong global network which we have been able to tap into to further fund our working capital requirements as well," said Aneesh Reddy, co-founder and chief executive at Capillary Technologies.
InnoVen Capital claims to have invested in over 110 firms, disbursing loan of $75 million to start-ups in 2017, up 25% from the previous year.
Another start-up where InnoVen has provided follow-on financing is yoghurt brand Epigamia.
Last year, Greek yoghurt brand Epigamia, owned by Drums food International, raised ₹ 90 crore in a round that also saw the participation of InnoVen Capital. InnoVen provided a follow-on tranche of financing to Epigamia this year.
“InnoVen not only trusts some of the more unique business propositions, like Epigamia, but also backs up their trust with continued support throughout the lifecycle of a startup. It’s been a great experience to have a lender who is more like a partner, who understands our business needs and believes in our vision and efforts, which they demonstrate by supporting us in many ways, including our debt requirements," said Rohan Mirchandani, chief executive and co-founder at Drums Food International