INDIA VENTURE DEBT REPORT 2024
The third edition of 'India Venture Debt Report' by Stride Ventures illuminates the story of venture debt (VD) transcending the
$1.2 billion mark in 2024, underscoring its vital role and evolution in the burgeoning startup ecosystem.
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Market Overview
The Grand Indian Startup Shift
78%
of Limited Partners/ Investors are positive about the current state of the Indian startup ecosystem
61%
of Founders and 59% of VCs have positive overall VC funding expectations for 2024.
45%
of Indian VCs and 30.5% Founders diversified their financial management post the fall of SVB
India
Venture Debt Landscape
Despite economic disruptions, India's venture debt market experienced remarkable growth, reaching
a record high of $1.2 Bn in CY23, marking a 50% surge from the previous year. With approximately
175-190 deals recorded, the venture debt deal space in India demonstrated a notable CAGR of around
34% since 2017. This surge highlights the rapid ascent and growing influence of venture debt as a
preferred asset class within India's dynamic financial landscape. It signals a significant shift in
financing preferences and market dynamics, showcasing the sector's increasing prominence and potential.
Sources: PitchBook and Tracxn
Venture Capital raised (in $ Bn)
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Venture Capital Deals
Overview
The Grand Indian Startup Shift
175-190
Total Number of Startups who raised Venture Debt in 2023
Consumer
Sector which saw the Maximum Number of VD Transactions
FinTech
Sector which saw the Maximum Investment in VD Transactions
$1.2 Bn
VD Raised in 2023
7 Years
Average Age of Startups which raised VD in 2023
$4 Mn
Average Ticket Size of VD Deals
Delhi NCR
Region which received the Maximum Number of VD Deals
$76 Mn
Average Equity Funding Raised by VD Backed Startups
Ecosystem Predictions - 2024
Leading VD Investment Sectors
According to the ecosystem, which includes the VCs, Founders and Limited Partners for the purpose of this report, the sectors that will attract the most amount of VD funding in 2024.
Founder Perception
Are you considering raising Venture Debt in 2024?
Here the survey tracks perceptions that Founders, VCs and Limited Partners have towards Venture Debt (VD) in India. This showcases that there is an affirmative outlook towards raising venture debt in 2024
NO
23%
YES
41%
MAYBE
36%
Evolution Of Debt
One Stop Solution
Both founders and VCs express a strong preference for venture debt providers offering a one-stop solution for all debt financing needs. This correlation suggests a shared desire for versatility and convenience in debt financing options across the startup ecosystem.
Founder perception
YES
NO
6%
94%
v/s
VC perception
YES
MAYBE
21.7%
NO
2.2%
76.1%
VC Perception
For recommending venture debt in 2024
The high percentage of VCs recommending venture debt (73.9%) closely mirrors the proportion planning to co-invest more actively with VDs (69.6%).
This correlation suggests that VCs see venture debt not just as a viable option for their portfolio companies but also as a strategic co-investment opportunity.
This correlation suggests that VCs see venture debt not just as a viable option for their portfolio companies but also as a strategic co-investment opportunity.
YES
73.9%
NOT SURE
23.9%
NO
2.2%
Limited Partners Perception
Venture Debt Performance as an asset class in 2023
4.2%
FELL SHORT OF EXPECTATIONS
54.2%
MET EXPECTATIONS
41.7%
EXCEEDED EXPECTATIONS
YES
54.2%
45.8%
NO
Limited Partners Perception
VD & International Interest
Have you observed increased international interest and participation in India's venture debt market?
The correlation between high satisfaction rates and increased international interest could suggest that positive returns on venture debt in India are becoming more recognized globally, contributing to the India’s attractiveness as a destination for venture debt investment.
Optimal Applications of Venture Debt for
Founders
Working Capital emerged as the primary choice, translating to 21.8% of the total top choice. They viewed Working Capital as the most critical area where Venture Debt could be applied. Notably, Optimizing Equity Dilution emerges as a second top strategic priority and Growth Financing as the third choice.
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Working Capital
Optimizing Equity Dilution
Growth Financing
Optimal Applications of Venture Debt for
VCs
VCs and Founders both prioritize Working Capital as Venture Debt's top use, emphasizing its importance for liquidity and flexibility. They align on valuing equity preservation, but diverge as VCs prefer Runway Extension, focusing on long-term stability, whereas Founders favor Growth Financing for immediate growth opportunities.
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Working
capital
capital
Optimizing Equity Dilution
Runway Extension
A Message from
Founders
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In navigating the complexities of scaling Perfios, we've leaned on the strategic leverage provided by venture debt (VD). This nuanced financial tool has been a catalyst, not just for growth but for innovation. Venture debt has empowered us with the flexibility to pursue our vision without compromising our values, growth or equity, underscoring its importance in the fintech ecosystem. It's a testament to how targeted financial strategies can fuel the ambition of companies like ours to architect a more inclusive and efficient financial landscape globally.
Co-Founder & Executive Chairman, Perfios
V. R. Govindarajan (Govi)
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In this sector, where innovation, speed to market, and brand visibility are crucial, venture debt has emerged as a key enabler of growth. It has provided us with the flexible, non-dilutive capital necessary to fuel our inventory expansion, marketing efforts, and product development without compromising our equity or vision. Venture debt's strategic advantage lies in its ability to support fast-paced growth while preserving the interests of founders and other stakeholders.
Co-Founders, SUGAR Cosmetics
Vineeta Singh & Kaushik Mukherjee
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Good Glamm's growth trajectory is also a story of triumph for the role of venture debt in the consumer sector. With Venture Debt investments leading the charge in 2023, it's clear that such financial strategies are indispensable for startups aiming for rapid domestic and global expansion without diluting equity. This approach has empowered us to innovate and scale within the personal care and cosmetics industry, demonstrating venture debt's pivotal role in supporting entrepreneurial ventures to achieve global presence and impact.
Founder & Group CEO, Good Glamm Group
Darpan Sanghvi
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Venture debt has played a pivotal role in HomeLane's evolution, facilitating the provision of affordable, high-quality home interiors and enabling our expansion without compromising our vision or equity. Its strategic adaptability has been instrumental in navigating industry challenges, underscoring the importance of astute financial planning in enhancing our impact and aligning with customer needs while adhering to our core values and goals.
co-Founder & ceo, Homelane
Srikanth Iyer
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Venture Debt is empowering 'Born Global' Indian startups like ours. In today's market climate, venture debt has been a cornerstone for global growth, offering a vital lifeline of uninterrupted and reliable capital. This form of financing enables us to expand our operations without the need to part with equity. Venture Debt is a strategic tool that propels us forward, enabling us to compete on the global stage while maintaining our entrepreneurial spirit and independence.
Founder & CEO, Wiz
Ramkumar Govindarajan
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In the current economic landscape, the synergy between venture debt and cleantech solutions is not just strategic, but essential. As the Founder of LOHUM, I've witnessed how this partnership catalyzes innovation and scales up sustainable technologies without diluting founders' equity. Venture debt is empowering cleantech companies to navigate the capital-intensive journey of bringing transformative technologies to market, ensuring that financial structures support rather than stifle environmental progress.
Founder & CEO, Lohum
Rajat verma
Optimal Applications of Venture Debt for
Limited Partners
Higher returns compared to traditional debt instruments
68%
Diversification of investment portfolio
76%
Lower risk compared to equity investments
24%
Potential for co-investment opportunities
36%
Access to high-growth startup ventures
52%
Shorter investment horizons
24%
Enhanced liquidity options
16%
Limited Partners value diversification (76%) and higher returns than traditional debt instruments (68%) as top benefits of Venture Debt. This highlights Venture Debt's balance between attractive returns and risk mitigation. Other benefits include access to high-growth startups (52%) and co-investment opportunities (36%), indicating strategic interests in the startup ecosystem and using Venture Debt for financial and strategic advantages.
Due Diligence and Selection Criteria
Higher Due Diligence for Securing VD
Following the maturity of the ecosystem and the funding winter, demand for venture debt has surged, accompanied by stricter due diligence processes. This entails thorough scrutiny of financials, unit economics, a strong investor background, target addressable market, the problem that a startup is trying to solve, pathway to profitability and cash flow projections. There also has been a heightened focus on audits for these startups. This trend reflects a growing consensus within the startup ecosystem on the importance of thorough evaluation processes, signaling a heightened scrutiny that aligns with the evolving standards of financial diligence.
In 2023, was there a heightened emphasis on due diligence processes for Venture Debt deals?
Due Diligence and Selection Criteria
Ideal Venture Debt Partner
There's a clear correlation between the Founders' emphasis on Low Cost, Flexible Structures, Warrants and Minimal Debt Covenants. These choices underscore a prioritization of cost-efficiency, operational agility, and speed in securing funds. This reflects a pragmatic approach to Venture Debt, where financial terms and the efficiency of the funding process are critical.
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LOW COST
FLEXIBLE STRUCTURES
LOWEST WARRANTS
Due Diligence and Selection Criteria
Ideal Venture Debt Partner
Ranking wise Flexible Structures is the most valued aspect, followed closely by Low Cost and Quick Turnaround, indicating these are the top priorities for VCs recommending Venture Debt partners. Both VCs and Founders value minimal Debt covenants, though VCs place a slightly higher emphasis on this factor. This preference highlights a shared desire to maintain operational freedom and avoid constraints that could limit a company's strategic options or growth potential.
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FLEXIBLE STRUCTURES
LOW COST
MINIMAL DEBT COVENANTS
Learn more about Venture Debt