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N+1 Capital, a new revenue-based debt fund started by investment professionals Rahul Chowdhury and Ashish Singla, aims to raise up to $100 million to invest in startups.

The figure includes a green-shoe option of $25 million, according to founders. The fund will make its first close of around $19 million by February, and will subsequently start deploying the capital.

N+1 Capital is registered as an Alternative Investment Fund- Category II (AIF-II) and has received approval from the Securities and Exchange Board of India (Sebi).

It will offer growth-stage capital to startups across sectors with ticket sizes of 1 crore to 15 crore. The debt fund is looking at firms which are at least a year old with net revenue of 50 lakh and average gross margins of over 30%.

“Globally, the prevalent way of funding has always been equity, and venture debt started seeping into the Indian market around 2014. But our fund structure is a part of a brand new asset class which grants quick access to capital to entrepreneurs without any personal collateral, equity and board seats, associated with it and also provides limited partners (LP) fixed returns," said Chowdhury, managing partner, N+1 Capital.

He said that unlike venture debt firms, N+1 isn’t dependent on future fund-raise of the startup, but will invest on the basis of its revenue outlook.

N+1 will provide startups access to capital, at a premium, without taking any equity share or collateral from the company. Further, it collects a percentage of the borrowing entity’s monthly revenues to pay the capital back, and gives steady returns to its limited partners on a quarterly basis.

The fund’s limited partners include family offices in the UK, the US, and India, as N+1 looks to provide at least 20% internal rate of return (IRR) to its backers.

“On the equity side, there can be a ‘herd-mentality’ to investing and through this new asset class, we would want to cover a large pool of entrepreneurs and widen the funnel helping companies with faster fund allocation," said N+1 managing partner Singla.

The fund aims to provide capital to more than 100 entrepreneurs during its lifecycle, and has partnered with investment platform, LetsVenture as its venture partner.

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