Mumbai-based Alteria Capital has raised USD 140 million for its maiden venture debt fund this week, making it the largest venture debt player in India, as venture debt financing is budding in the world’s second-largest startup ecosystem by startup numbers.
Participating investors in the fund include local banking institutions, Azim Premji Foundation, personal investors like Flipkart co-founder Binny Bansal and local multiplex chain SPI Cinemas founder Kiran Reddy, in addition to various family offices.
It’s noteworthy that, Smaller Industries Development Bank Of India (SIDBI), one of the local bankers, made its largest-ever funding of USD 22.8 million in the fund under Indian government’s Fund of Funds for Start-up program, an initiative launched in 2016 in line with the country’s Start up India plan in an aim to fund MSME, or micro, small, and medium enterprises.
Alteria plans to completely deploy the fund in 18 months with a focus on start-ups across technology, health care, consumer, and other segments.
India’s venture debt market was worth USD 290 million in 2018, and is mostly dominated by three firms—Alteria Capital, InnoVen and Trifecta Capital.
The past years have seen the increasing cases of startups raising venture debt in India. It is a type of debt financing that growth-stage startups usually raise for their working capital needs or other capital expenses yet don’t want to dilute their equity.
Many established India startups, like Snapdeal, Myntra, and BigBasket, at one point, have all raised venture debt to fuel their growth.
In 2017, Indian startups raised USD 14 billion out of which debt financing accounted for USD1.2 billion, meaning one-tenth of the Indian venture investments was made through debt financing.
Alteria’s venture debt fund comes at a time when the country’s startup debt financing market is expected to grow further. Indian startups are expected to raise between USD 217 million and 261 million through debt financing, representing a 25% to 30% growth from a year earlier.
Vinod Murali, the co-founder of Alteria, believes that “venture debt is now an integral part of funding rounds for start-ups across stages and sectors.”
The co-founders of Alteria Capital, Ajay Hattangdi and Vinod Murali, have quite a history together. They worked at Citigroup initially and later set up SVB India Finance, a subsidiary of Nasdaq-listed SVB Financial Group, in 2008, and expanded operations across Southeast Asia.
In 2015, Temasek, Singapore’s sovereign wealth fund, and United Overseas Bank took over SVB India Finance and renamed it as InnoVen Capital. The duo then left InnoVen Capital to start Alteria in early 2018.
Alteria Capital has previously provided loans for many star start-ups including cloud kitchen start-up Faasos, scooter rental platform Vogo, online learning firm Toppr, health food and beverage start-up Raw Pressery, on-demand delivery service Dunzo, student housing living start-up Stanza Living, and online grocer big basket.
The fund has sought to differentiate itself from the current deluge of venture debt companies in India with its initiative called ‘Activate’, through which it leverages its network to connect start-ups with a wide range of enterprises and organizations, including corporates, investors, law firms, as well as researchers, to help propel their growth.
“Everybody recognizes that capital is only one of the resources that a startup needs,” Hattangdi said as quoted by local media TechCircle. “There are a bunch of resources such as connections with prospective clients, service providers, and investors that are necessary.”