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Venture capital fund Unicorn India Ventures, led by former SEBI chairman M Damodaran, launched their maiden venture debt fund today. This sector agnostic fund will be worth Rs 600 crore and is the second fund from Unicorn.
"The Indian startup ecosystem is maturing. The capital structure of funds is lopsided with hardly any debt. We believe, it is the right time to launch venture debt fund alongside traditional venture equity," said M Damodaran, Chairman, Unicorn India Ventures.
Unicorn has previously invested in Boxx.ai, GrabonRent, Inc42, NeuroEquilibrium, Pharmarack, Sequretek, SmartCoin, VanityCube among others from the first fund.
Anil Joshi and Bhaskar Majumdar are the founders and managing partners at the firm.
"We are looking at an average ticket size of about Rs 20 crore as ticket sizes of debt funds are higher than equity ticket sizes. In three years time we will invest one round followed by a second round. We plan the Rs 600 crores to work twice in two rounds," said Sudip Bandyopadhyay, managing partner, Unicorn India Ventures.
The fund will invest in up to 10 startups in a year for a maximum of eight years," he added.
Bandyopadhyay said that banks and NBFCs find it harder to provide debt funds to start-ups in the absence of healthy collateral. This has created a need for debt funds as an asset class.
Established start-ups have been raising debt funds owing to higher need of funds without diluting equity shares. This fund will, however, invest in later stage companies once they have started generating cash flow to service debt and also raised some funding from established VCs.
"Primarily, it would be a sector agnostic fund. We will be looking at international SaaS companies and software oriented companies as these sectors have more cash flow," said Bhaskar Majumdar. They will also focus on hardware centric companies in the startup ecosystem. Unicorn expects at least $ 500 million in venture debt is required by the startup ecosystem in India..
Last year Indian start-ups raised over $7 billion with minimum debt component. The VCs offering debt funds are Trifecta (Rs 500 crore) and Alteria (Rs 1,000 crore).