Venture debt funds gear up to raise larger funds for startups

Venture debt funds are gearing up to raise new, larger funds on the back of higher demand from startups, which aim to extend the cash runway and fund working capital requirements.

Debt providers, such as Alteria Capital, Innoven Capital, and Trifecta Capital are raising new funds, with many of them witnessing their highest momentum in transactions in December. They also plan to close more deals this year.

Alteria Capital is raising its second fund with a target corpus of ₹1,000 crore and a ₹750 crore greenshoe option, significantly higher than its earlier fund of ₹962 crore. It aims to hit the first close by March. Recycling the principal from its first fund along with the fresh fund, it plans to deploy close to $100 million debt this year.

“Founders have become more sensitive towards the cost of equity and dilution of stake in their companies. With covid, most startups have found innovative ways to grow at rationalized cost structures. This has made them rightly poised to raise more venture debt as unit economics have significantly improved,” said Ankit Agarwal, partner at Alteria Capital.

Alteria will also introduce a structured debt product targeted for growth to late-stage startups, where it will co-invest with its limited partners.

Trifecta Capital aims to raise its third fund this year with a targeted corpus of ₹1,250-1,500 crore.

Innoven Capital, which has $500 million of commitments for India and other Asian markets, is also exploring the launch of its maiden fund this year, according to two individuals aware of the matter.

“Despite massive disruption during the early phase of covid between March and June, we closed 28 transactions last year, largely driven by high deal flow in the last quarter, which was the biggest quarter ever in our 12-year history. With multiple use cases for venture debt and many startups aiming to increase runway before they go for their next fundraise, demand for venture debt increased,” Innoven Capital CEO and managing director Ashish Sharma said.

Nandita Mathur from New Delhi contributed to this story