Fintech Emerges as Top Sector for Venture Debt Funding in 2022, Raises $400 Million: Report
The total amount of venture debt disbursed in India in 2022 is almost 2.6X up from 2019 to around $800 million. In 2021, venture debt payouts were around $538 million.
India’s fintech emerged as the leading sector to raise funds through Venture Debt (VD), accounting for the highest number of deals and the maximum amount raised in 2022 at around $400 million.
However, by 2023, founders and venture debt players believe that Business-to-Business (B2B) trading startups will be the most trending sector for venture debt, followed by Electric Vehicle (EV) segments, says a report from Stride Ventures titled ‘The India Venture Debt Report 2023’.
The report said that while the majority of founders (around 72 percent) feel that stable revenue and growth is necessary before they can raise debt, 28 percent of founders are also open to raising debt at a stage after proof of concept.
Venture Debt refers to a range of debt financing products that apply specifically to Venture Capital backed companies. It is primarily a type of loan offered to early-stage, growth-stage and late-stage companies with venture capital support.
Key Venture Debt players in India include Stride Ventures, Alteria Capital, Trifecta Capital and InnoVen. Some of the startups that have raised venture debt in recent times include Paper Boat, Pepperfry, Meesho, BluSmart Mobility, Chaayos, Cars24, LendingKart, Jupiter, Perfios, MoneyView and Uni.
The total amount of venture debt disbursed in India in 2022 is almost 2.6X up from 2019 to around $800 million. In 2021, venture debt payouts were around $538 million. Venture Debt penetration in India is around 0.8 billion dollars against 32 billion dollars in the US. At the same time, venture capital penetration from 2022 is around $24 billion.
When talking about the use cases for raising debt over equity, the report found that 40 percent of founders and 56 percent of investors believe that Working Capital is the leading use case of Venture Debt.
“The 2022 survey results also indicated that the best use of VD is Working Capital followed by Runway Extension according to both founders and investors,” the report said.
Around 62 percent of founders and 44 percent of investors believed that helping with bank limits is the most important value-added service offered by a VD fund. This is followed by advice on financial services for companies.
