The Year 2022 will see the Fintech sector as the most active in raising debt followed by Consumer and Agritech, as per the survey conducted by Stride Ventures, a leading venture debt firm in India.
The survey showcases the mindset of Founders and Venture Capital firms and also the upcoming trends of Venture Debt in India.
Key trends for 2022, as per the survey show that for startup founders, cheapest pricing is not the most important factor while selecting a Venture debt partner, instead, most founders (53.6%) prefer Flexible Structures and Quick Turnaround Time (25%).
The first of its kind report – India Venture Debt Report 2022 – conducted across founders and Venture Capitalists highlights the emerging use cases of Venture Debt as an asset class. It indicates that 100% of founders of Growth-stage companies are certain of raising venture debt as compared to Early-stage founders (85.7%) and Late-stage founders (66.7%).
The majority of the founders prioritized stable revenue and growth structure before raising funds through Venture debt, while VCs have advised against raising debt at a Pre-Revenue stage. Most VCs (75%) voted for stable revenues and growth stage as the apt time to raise debt while founders (72%) preferred raising debt in between two rounds of funding.
Commenting on the maiden venture debt report, Ishpreet Singh Gandhi, Founder, Stride Ventures said, “Venture Debt has seen exceptional growth and has emerged as an important asset class over the years. The start-up ecosystem, which is flourishing in India, will play a key role in creating multiple opportunities for Venture debt to scale further. Through our distinctive ‘India Venture Debt Report 2022’, we aim to showcase the rise, developments, and outlook of the venture debt ecosystem while creating awareness amongst founders about the several benefits of raising funds through venture debt in tandem with equity.”
The report also provides insights on the Venture debt ecosystem – the overview and growth of Venture debt in India.
Key findings of the report are as follows: (Calendar Year 2021)
● In 2021, a total of $538 Mn of venture debt was disbursed as compared to $271 M in 2020
● The Fintech sector saw 28% of all Venture debt deals, the highest among all sectors in 2021 followed by Consumer at 21% and B2B Commerce at 16%. The Fintech sector also received the majority of investments at 47%
● Companies that are in Series D and beyond stages saw the most deals (31) raising $250 M in 2021 followed by Series A stage companies who have raised $112M
● The Average Ticket Size of Venture debt deals in 2021 was $5.85M
● The Average Equity funding raised by Venture debt backed start-ups in 2021 was $126 Mn
A general trend, as observed from the data collected, is that Venture debt, as a financial instrument, has been growing rapidly in the past few years. The rise of the Venture debt ecosystem is indicated by the fact in the last 5-6 years the amount of venture debt disbursed has increased over 10 times and has doubled in the last year.
The year 2021 saw 111 companies raising funds through debt of which 91 were unique. Geographically speaking, Bengaluru saw the most number of Venture debt deals, accounting for 40% followed by Delhi NCR at 27% and Mumbai at 18% respectively.