Trifecta, through its two venture debt funds, has invested over Rs1,800 crore in more than 70 companies including in 9 unicorns and 11 that are on their way to become one
For its maiden equity fund - Trifecta Leaders Fund - I - the firm is looking to raise as much as Rs1,500 crore ($200 million)
Trifecta Capital, known for its venture debt investment funds, is making a significant expansion in its business. The firm is launching its first equity fund, Trifecta Leaders Fund-I, which will target late-stage equity investments in Indian startups, said senior executives of Trifecta in an interaction with Mint. For this fund, the firm aims to raise as much as ₹1,500 crore ($200 million), including a greenshoe option of ₹300 crore.
Trifecta pioneered the venture debt fund model in India when it launched its first fund in 2014, at a time when the concept of venture debt was hardly known in the Indian startup ecosystem. The firm has through its two venture debt funds invested more than ₹1,800 crore in over 70 companies, including nine unicorns and 11 that are on their way to becoming one.
The decision to start a venture debt fund arose from a major gap in the market in terms of availability of debt for new-age tech companies, according to managing partner Rahul Khanna. Similarly, in the current environment, while a lot of early and growth stage capital is available, late-stage capital is an area that sees a major gap and is being serviced largely by investors not residing here, he said.
“We know that there are a lot of companies that are in the back end of their journey, which means that they are 12-36 months away from a liquidity event. Generally, that is a series D, E, F type of situation and is a structural gap in the ecosystem. Founders were telling us that they need help with secondary transactions to clean up their cap table, but there is no structured, predictable and easy way to do this. There is enough critical mass of opportunity to merit more late-stage VC activity," Khanna said.
Khanna said he hopes to achieve a first close of around ₹600 crore by June in the maiden equity fund, which will invest in late-stage, category leading technology companies that are likely to go for IPOs in 1-3 years. It will build a portfolio of 8-10 companies, writing cheques of $20-30 million per investment.
The fund will be managed by Lavanya Ashok, former managing director at Goldman Sachs, and Surbhi Garg, who previously managed strategic investments at Reliance Jio.
“There is a long list of over 20 companies that we have already identified. We will look to create entry positions in these firms such that we solve problems for the founders," said Lavanya
“These could be situations where the founder wants to create liquidity for an early stage investor or there are ESOPs of people who have moved on. We can also do small primary growth investments," she added.
According to Khanna, the firm’s foray into late stage equity investing is not an opportunistic play.
“This is not an opportunistic exercise. We have a great track record and the access we enjoy to these startups is unparalleled. We have built a quality team. Lavanya, given her extensive experience at Goldman, brings a wealth of experience relevant to this strategy. Surbi’s transaction experience also adds a lot of real world execution capability. This is not just putting together a team that is opportunistic. This is a strategic long term extension of the trifecta platform," he said.
Khanna feels that Trifecta's deep relations in the venture ecosystem through its debt funds gives it a unique advantage over other investors that are also eyeing the late stage space.
"There are obviously unique advantages that we have with the existing relationships that we enjoy. The access that we enjoy is unparalleled. Between 70-75% of the portfolio creation we would like to do within the relationships that we have. Because we know these companies, we have access to the cap table and we have a dialogue with the founder to facilitate those transactions. And remaining will be companies that got away. Companies where we didn't have the opportunity to provide credit to," said Khanna.
Others too are looking to tap the late stage and pre-IPO investment opportunity in India’s high growth tech startups.
Mint reported on 23 March that IIFL Asset Management has launched a Rs2,000 crore fund that will make late stage and pre-IPO investments in startups.
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