Sharp increase in risk-debt investments in the first half of 2021


Chennai: A lesser-known form of risky financing – risky debt – saw a sharp increase in the first half of 2021 with nearly $ 170 million in risky debt deals concluded, up from $ 55 million in H2-2020 and $ 64 million in H1 2020, according to Venture Intelligence data. Total deal count and average deal size are also at an all-time high, VC firms say, as late-stage startup founders find new, specialized use cases for risk-based debt with models. clearer commercials. They also organize rounds of table with venture capital debts to have better leverage on their books, and look for more variations in products besides term loans and consider options such as bill financing, supplier financing, etc., they added.
Venture capital firm Alteria Capital said it has funded more than 20 companies with total commitments of $ 90 million in the first half of 2021 in what could be the largest deployment in a six-month period. Some recent transactions include investments in Infra.Market, Dealshare, Bharatpe, Rebel Foods, Mensa Brands.
“One area that has been developed recently is the Thrasio model where we have partnered with Mensa Brands with an initial commitment of $ 10 million,” said Vinod Murali, Managing Partner of Alteria Capital. For the Thrasio model – where mainstream brands are identified and acquired – the concept of leverage has to be in place for the model to be attractive, and although large equity checks are involved, debt has also become. an important element, he added.
Ashish Sharma, CEO of InnoVen Capital, said that with more venture capital available, more startups are moving into fundraising, and some of these entrepreneurs are looking to mix both equity and debt into their turns. “More equity means a better ability of the startup to service debt and therefore the equity boom has been positive for risky debt,” he added. Another risky debt player, BlackSoil, said it closed almost 4 times the number of deals in H1-2021 compared to the same period last year, and despite the second wave, disbursements also hit a record high. record level. “A healthy pipeline will ensure that we achieve nearly Rs 300-Rs 350 crore in cumulative venture capital debt disbursements this calendar year,” said Ankur Bansal, co-founder and director of BlackSoil. Ishpreet Singh Gandhi, founder and managing partner of venture credit firm Stride Ventures, observes that startups are also raising debt to fund acquisitions amid high consolidation in some industries, in addition to conventional use cases for funding. working capital and runway extension. “The risky debt market is getting aggressive. In the past month alone, Stride Ventures announced five to six deals, ”he added.
However, while risky debt accounts for about 15% of the total venture capital market in the United States, here in India it is still less than 5% and still has a long way to go.

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