Active Stocks
Mon Apr 15 2024 15:59:36
  1. Tata Steel share price
  2. 160.90 -1.59%
  1. ITC share price
  2. 425.90 -0.98%
  1. State Bank Of India share price
  2. 757.75 -1.17%
  1. ICICI Bank share price
  2. 1,078.80 -2.30%
  1. NTPC share price
  2. 361.35 -0.08%
Business News/ Industry / India's venture-debt market crossed $1 billion in 2023: Report
BackBack

India's venture-debt market crossed $1 billion in 2023: Report

The milestone comes as companies and startups worldwide have been struggling with a drop in funding activity as high interest rates, uncertain macroeconomic conditions and geopolitical concerns have damped investor sentiment globally.

Unlike traditional debt financing, venture debt is usually provided by specialised lenders willing to take on more risk for potentially higher returns.Premium
Unlike traditional debt financing, venture debt is usually provided by specialised lenders willing to take on more risk for potentially higher returns.

Bengaluru: India's venture-debt market surpassed the billion-dollar mark at $1.2 billion last year as rising confidence from founders, venture capitalists and investors fuelled deals in the sector, according to a report published by Stride Ventures.

The milestone, which marks a 50% jump from the previous year, came from 175-190 deals and reflected a compound annual growth rate (CAGR) of about 34% from 2017 to 2023, according to the report, published on Thursday.

"This leap signals a shift towards strategic financing, propelling Indian innovation to global prominence," Stride Ventures managing partner Ishpreet Singh Gandhi said. Gandhi added that the market was poised to hit $1.8-2 billion by 2026.

With a growing preference for one-stop debt solutions that simplify fundraising and financial packages for startups, the trend reflects the market's maturity and the increasing sophistication of venture-debt solutions tailored to the needs of companies, the report said.

Venture debt financing is a type of financing often used by startups that do not yet have a proven track record of generating revenue. Unlike traditional debt financing, venture debt is usually provided by specialised lenders willing to take on more risk for potentially higher returns.

Funding winter sparks a shift

The billion-dollar milestone comes as companies and startups worldwide have been struggling with a decline in funding activity as high interest rates, uncertain macroeconomic conditions and geopolitical concerns have damped investor sentiment globally. India's performance signals a critical evolution in investment trends and economic factors shaping the startup landscape despite these challenges, Stride Ventures said.

India’s startup ecosystem, which ranks third globally on the number of such companies, secured $8.2 billion in venture capital investments in 2023, according to the India Tech Unicorn & Exits Report 2023, accounting for about 3% of the global venture-capital market. This marked a 68% decline from the $25.9 billion raised in 2022. Early-stage startups saw a reduction of 68% while funding for seed-stage startups fell 57%. Late-stage startups were hit the hardest, seeing a 70% decline in funding compared to 2022.

Amid the funding winter, venture debt has become an increasingly versatile tool for financial management, strategic growth and risk mitigation beyond traditional equity financing.

Founded in 2019 by Gandhi, Stride Ventures has made about 100 investments in more than 15 sectors including consumer internet, fintech, SaaS and B2B. It has launched three funds and its portfolio firms include Spinny, Sugar Cosmetics, Exotel and Inframarket.

Alteria Capital, another venture debt fund, has invested in companies such as Dunzo, Country Delight and Curefoods. Founded in 2017, Alteria manages assets worth 4,250 crore in domestic capital.

Stride Ventures expects a surge in clean-tech deals this year as stakeholders are seeing a shift towards sustainable and environmentally conscious investments in line with global concerns.

"India's venture debt market is expanding swiftly… this surge is fuelled by thorough due diligence and the asset class's promise of resilience and returns. As both founders and VCs increasingly integrate venture debt to balance equity and growth, it becomes central to India's funding landscape," Stride Ventures managing partner Apoorva Sharma said.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 22 Feb 2024, 03:56 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App