This move provides RBL Bank the opportunity to support the emerging venture debt market in India. The fund will focus on providing structured debt to high-growth start-ups that have raised Series-A or Series-B rounds of equity funding. The Fund plans to deploy venture debt of around ~125-150 crore per annum.
“RBL Bank is dedicated to supporting the growth of entrepreneurship and innovation in India. Through our investment in the Trifecta Capital Venture Debt Fund, we have the ability to cater to this growing demand for specialized financing,” said Rajeev Ahuja, Head - Strategy, RBL Bank.
Trifecta Capital has been founded by Rahul Khanna, previously a Managing Director at Canaan Partners and Nilesh Kothari, previously a Managing Director at Accenture, who jointly have over forty years of investing, lending and operating experience in institutional platforms.
“Our goal is to be the preferred provider of structured finance to the new economy in India. We are delighted to have RBL Bank, a very progressive and fast growing financial institution, as the anchor investor in our maiden venture debt fund. We look forward to growing the venture debt market and making the most of this partnership,” said Rahul Khanna, co-founder of Trifecta Capital.
The Indian VC ecosystem has grown significantly in the last decade and in 2014, VC funds invested $2.1 billion, an increase of 47.7% from 2013 when VC funds invested $1.4 billion, according to data compiled by VCCEdge, the financial research arm of VCCircle.com.
Venture debt can complement venture capital. “Trifecta would provide much needed debt financing to some of our portfolio companies,” said Mr. Pradeep Tagare, Investment Director, Intel Capital India
Structured as a Category II AIF, Trifecta Venture Debt Fund will invest in secured debt instruments with attached equity warrants of high growth companies backed by leading VC funds and provide domestic investors a unique opportunity to co-invest with the best. The fund will have a low risk profile by leveraging its proprietary risk management framework and portfolio diversification strategy. Distributions will be made quarterly, providing investors with early and more predictable returns.
“Given the unique risk-reward profile of this asset class, Trifecta Capital has been able to attract RBL Bank as well as several other reputed institutional investors and large Family Offices into the Fund. We continue to see significant interest in the fund and have therefore taken our target fund size up from ~300 crore to ~400 crore,” said Nilesh Kothari, co-founder of Trifecta Capital.
Besides availing of debt financing, investee companies of Trifecta Venture Debt Fund will enjoy preferred terms on a specialised set of banking products created for startups by RBL Bank. “We have created a fast track program to support early stage companies with a basket of banking services to jumpstart their operations,” said Rajeev Ahuja, Head - Strategy, RBL Bank.
While the Venture Debt asset class is relatively new in India, it’s a significant component of the venture capital ecosystem in the United States as well as Europe, comprising 10-15% of all venture capital deployed on an annual basis. “Venture Debt has a risk reward profile that is favoured by investors like pension funds, endowments and insurance companies and now Indian investors also have this opportunity available,” said Arvind Mathur, President of the Indian Venture Capital Association.
Trifecta Capital has recently obtained pre-approval from the Securities and Exchange Board of India (SEBI) as a Category II AIF and proposes to start investment operations within the next few months.