InnoVen Capital leans on growth-phase start-ups, doubles debt biz to $85 mn

Nearly half its deals have been with start-ups that have raised series B, and are in growth phase

Venture debt firm InnoVen Capital says it has doubled its business last year to $85 million, as over 45 venture funded start-ups such as Oyo, Swiggy and Nestaway raised debt to build their business.

The firm says entrepreneurs are looking at debt as part of their fund raising so that they don't hand over equity to investors. The biggest venture debt deal done in the country so far is around Rs 55 crore to Oyo, which owns and aggregates standardised hotel rooms.

Nearly half the deals done by InnoVen have been with start-ups that have raised series B, indicating that they are in the growth phase.

"It is difficult for conventional lenders to embrace loss-making, high-growth start-ups but there is a clear need for alternative sources of capital for founders with minimal dilution," says Vinod Murali, Deputy CEO India, InnoVen Capital. "We create a track record of these companies on repaying debt. We have lenders on our platform, who help curate and have better conversations."

InnoVen, which started in 2008, has so far funded over $225 million in 150 transactions to over 100 companies in India.

In FY17, InnoVen Capital closed cross-border deals for two companies -– CRM solutions firm Capillary Technologies and online professional certification firm Simplilearn -– across India and Singapore, in addition to the deals independently done in South East Asia.

Most venture capital firms that invest in growth stage start-ups include InnoVen as part of their funding round, helping start-ups build discipline in servicing debt, which allows them to eventually run organisations effectively. InnoVen provides debt to one out of four applicants, making their due diligence process as an effective screening mechanism for investors.

"It is satisfying to see how the acceptance for our debt-funding product has grown over the years to a point where InnoVen has been among the most active participants in the Indian venture capital scene in 2016-17," Ajay Hattangdi, Group COO and CEO India, InnoVen Capital, said in a statement.