Alteria Capital, which provides loans to startups, has closed its maiden venture debt fund at a corpus of $140 million ( ₹960 crore), signalling a sharp rise in appetite for debt financing from startups, said a senior executive of the firm.
The fund has raised more than the ₹800 crore it had set out to raise, with the final close including a greenshoe option, which gives the fund an option to raise more than it had originally planned.
The limited partners (investors in the fund) include several large domestic banks, family offices, and development financial institutions such as IndusInd Bank, Small Industries Development Bank of India (Sidbi), Azim Premji Foundation, and Flipkart co-founder Binny Bansal.
Alteria was started in early 2018 by Vinod Murali and Ajay Hattangdi, former executives of Temasek-owned InnoVen Capital, also one of India’s largest venture debt firms.
“Venture debt is now an integral part of funding rounds for startups across stages and sectors. There is a better awareness of how the product can be utilized by startups as well as the expectation on returns for investors into the fund," said Murali.
“Since we have the ability to recycle capital, we will end up deploying approximately ₹1,800 crore from this fund and we are seeing a very strong pipeline of startups across technology, healthcare and consumer segments to absorb this capital over the next couple of years," he added.
Alteria announced its first close of ₹356 crore in March last year, followed by a second close of ₹625 crore in October last year.
It has already invested ₹540 crore across 28 transactions, in startups including online learning firm Toppr, student housing living startup Stanza Living, scooter rental platform Vogo and digital lender Lendingkart, among others.
Alteria also seeks to differentiate itself and help its portfolio of companies with an initiative called Activate, through which Alteria leverages its network to connect portfolio companies with large corporations, investors and emerging technologies, Hattangdi said in an interview.
Alteria’s fundraise also signals the increasing popularity of debt among startups, since it helps them avoid excessive dilution of equity, finance working capital or day-to-day business operations, and increases the runway prior to a large equity fundraise.
India’s venture debt market is dominated by three firms—Alteria, InnoVen and Trifecta Capital, which is currently raising a ₹750 crore second fund. Private sector bank RBL Bank Ltd anchored Trifecta’s first venture debt fund with an investment of ₹50 crore in 2015.
The venture debt space has also seen the interest of several wealthy individuals including Flipkart co-founder Sachin Bansal, who has made venture debt investments in two scooter-rental startups Vogo and Bounce.
While the venture debt market size last year was about ₹2,000 crore last year, it is expected to grow this year on the back of more startups seeking funds and increasing ticket sizes.
Mint reported on 24 December that the total deal value is expected to grow 25-30% this year.
Venture debt deals have also seen a rise in follow on rounds, i.e., investors doubling down on existing portfolio companies. Alteria and InnoVen alone have done 10 follow-ons this year.