Unicorn India Ventures, an early-stage venture capital fund, has launched its maiden debt fund with a corpus of Rs600 crore ($93 million), the company said on Monday.

The fund will look to invest in about 10 companies a year, with an average ticket size of Rs20 crore. Unicorn India Ventures was founded in 2016 by Anil Joshi and Bhaskar Majumdar.

Lending to start-ups is referred to as venture debt, and is substantially different from regular corporate lending, which is generally asset-backed and provided to profit-making companies.

The fund will seek to tap its existing limited partner base while also bringing some other investors on board. Investors in private equity and venture capital funds are called limited partners.

“Our existing LPs will participate and we expect a lot of institutional investors to join in. India has a lot of appetite but we wish to have foreign LPs as well. The appetite for this type of asset class is higher than equity therefore participation from pension funds, SIDBI (Small Industries Development Bank of India), insurance companies, high net-worth individuals (HNIs), family offices is also high," Joshi told Mint.

The fund will have an investment horizon of 7-8 years, said Unicorn India Ventures chairman M. Damodaran, former chief of the capital markets regulator Securities and Exchange Board of India (Sebi).

“The experience of an equity investor is helpful in launching debt fund as the investor understands the nature of business though the instrument is different. While, there has been a lot of venture equity activity over the last few years, start-ups are still starved of funds for growth. The capital structure of funds is lopsided with hardly any debt. We believe, it is the right time to launch a venture debt fund, as this asset class will sit alongside traditional venture equity," Damodaran said.

Besides the venture debt fund, Unicorn India is also in the midst of achieving the final close of its first equity fund of Rs100 crore this year, Mint reported earlier.

Unicorn has already invested around 25% of its corpus in close to 10 start-ups including micro-lending platform SmartCoin, rental marketplace GrabOnRent, digital-marketing-focused artificial intelligence start-up Boxx.ai and pharmaceutical-sector-focused software-as-a-service company Pharmarack.

The Indian venture debt market has been picking up pace with newer funds entering the scene. The venture debt deals have witnessed a significant uptrend this year with deals worth $77 million as compared to the previous year ($40 million) in terms of value, according to private equity tracker Venture Intelligence.

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