Lending a Lifeline

There is a huge opportunity in satiating the hunger pangs of Indian consumers, believes Shripad Nadkarni, Founder, Fingerlix. So, since 2015 his food start up has been serving ready to cook offerings like multigrain idli batters and batata wada parathas in Mumbai, followed by Pune and Delhi. This January, the erstwhile marketing head of Coca Cola India expanded the platter by taking Fingerlix to Bangalore, Chennai and Hyderabad.

"We've seen terrific growth. We're in six cities now and the response has been incredible," he says. Naturally, Nadkarni needed to fund these expansions. So, after diluting his stake with a Series A2 round of venture capital last October, he turned to venture debt this March to finance growth and preserve his equity while extending the runway till the next equity fund raising. "Venture debt is a great instrument as a bridge without diluting equity," says Nadkarni.

Venture debt is an asset class that's coming of age in the Indian start up ecosystem with several ventures from BigBasket and Yatra to Pepperfry and Ninjacart availing of it in recent years. Nearly $150 million or around Rs1,000 crore of venture debt was disbursed to start ups deprived of traditional bank finance in calendar 2017. This is small compared to the larger venture capital market. Nevertheless, the pace is set to accelerate with at least four new venture debt funds expected to raise over Rs2,500 crore capital over the next year or so. Some Rs1,500 crore of debt capital is expected to be disbursed to start ups over the coming year.

Venture debt essentially works like traditional bank loans except that start ups aren't profitable and venture debt firms dont demand collateral. The venture debt though comes with a fixed coupon and tenure and companies have to repay the principal and interest on a monthly basis after an initial moratorium.

Fingerlix's Rs8.5 crore venture debt comes from the newly minted venture debt fund