Indian start-ups raised $1.2-b venture debt in 2023: Report

India’s venture debt (VD) market crossed the billion-dollar mark in 2023, a 50 per cent surge from the previous year.

Venture debt globally stood at about $60-65 billion in 2023, according to the ‘India Venture Debt report 2024’ by venture debt firm Stride Ventures. About 190 start-ups raised a total of $1.2 billion last year, marking a 50 per cent increase.

The surge, accounting for approximately 175-190 deals, reflects a Compound Annual Growth Rate (CAGR) of about 34 per cent from 2017 to 2023

Consumer and fintech emerged as the top sectors for raising funds through venture debt in India in 2023, leading in both deal volume and total funding raised respectively. Fintech led with a more than 55 per cent share of the total investment, followed by the consumer sector at around 25 per cent.

In 2024, founders and venture debt firms expect clean tech, especially electric vehicles (21.6 per cent), consumer (19.5 per cent), and fintech (15.8 per cent) sectors to raise more venture debt, the report said.

Venture debt refers to a variety of debt financing products applicable specifically to venture capital-backed companies. These are growth stage firms that may lack positive cash flow, tangible collateral but have secured investments from venture capitalists.

start-up scene

“This leap signals a shift towards strategic financing, propelling Indian innovation to global prominence. With the market poised to hit $1.8-2 billion by 2026, India’s future in the global startup scene looks not just promising but unstoppable,” said Ishpreet Singh Gandhi, Founder & Managing Partner, Stride Ventures.

The sector-agnostic investment firm has a portfolio of over 120 start-ups, including the likes of Mensa, Sugar Cosmetics, Perfios, Spinny, Zetwork, Blu Smart, Jupiter and Slice, through its three funds.

Venture debt saw a shift as Pre-Series A to Series C stages receiving 79 per cent of deals and 53 per cent of investment volume. e. This pivot towards early to mid-stage companies indicates an evolutionary stride in the use of venture debt, showcasing a broader acceptance across various stages of company growth.

The robust Indian venture debt landscape is in stark contrast to a decline in venture debt fundraising in the US last year. Apoorva Sharma, Managing Partner, Stride Ventures attributed this to due diligence and the asset class’s promise of resilience and returns.

“India’s venture debt market is swiftly expanding, jumping from $800 million to $1.2 billion of venture debt within a year, highlighting a seismic shift in investor confidence and strategic adoption. As both founders and VCs increasingly integrate venture debt to balance equity and growth, it becomes central to India’s funding landscape, signifying a pivotal evolution in the start-up ecosystem,” he noted.

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