Trifecta launches its largest-ever venture debt fund at ₹2,000 crore

The fourth venture debt fund, which includes a greenshoe option of ₹500 crore, is sector agnostic and has seen participation from new and existing investors. The previous three funds were ₹500 crore, ₹1,024 crore and ₹1,777 crore in size. The firm has deployed about ₹6,000 crore across the three funds and has invested in 180 startups.

Historically, Trifecta’s venture debt funds typically target companies at series A or B stage and beyond which are looking to scale rapidly. Venture debt is usually given after assessing the company’s ability or likelihood to raise the next round of equity financing alongside other factors such as cash flows and overall financial health.

Also read | Trifecta Capital raises 3rd venture debt fund

“We are seeing a lot of green shoots in financing…there is a lot of activity in the seed to series A rounds…It's interesting that several funding rounds today have a combination of debt and equity which was not the case back when we started," Khanna said in a telephone conversation.

Khanna added that the investment firm sees immense potential in emerging areas such as electric mobility, fintech, software-as-a-service and the enterprise tech sectors among other sectors including healthcare, manufacturing and industrials.

Venture debt supports growth

Venture debt which is usually complimentary to equity financing, can be deployed by companies for a host of purposes including working capital needs, capital expenditure, and acquisitions. This enables startups to focus their equity capital on growth initiatives, but a combination of debt can help companies also extend their financial runway and potentially aim for a higher valuation.

“We have been steadfast in our support of the startup ecosystem despite all the challenges that the market has seen since 2015. Our focus on great founders, category-leading businesses with sound unit economics, and strong equity investor backing has helped establish best practices in the industry and enabled the strong growth of this asset class," he said.

Also read | Startups turned to venture debt amid funding winter. Now they’re facing the heat

The concept of venture debt becomes particularly useful at later stages like Series B and beyond as founders, who have established their product market fit and are generating revenue at this point, often want to minimize incremental dilution for existing shareholders while still securing the capital necessary for scaling operations.

In 2021, Trifecta also launched its first-ever ₹1,500 crore growth equity fund to invest in about a dozen late-stage startups including Ixigo, Cars24, and Good Glamm Group. The investment firm may launch its second growth equity fund in early to mid-2025, Khanna said. The equity funds typically target startups at Series C or D stages.

Founded in 2015 by Khanna and Nilesh Kothari, Trifecta was started with the aim of providing an alternative form of non-dilutive financing to help founders with the necessary funds to scale their businesses while allowing them to retain more control and ownership.

Also read | Bulk of venture debt deployed in Series D+ startups in 2022, says report