Varanium Capital hits first close of Rs 250 crore maiden venture debt fund; to invest in 100 startups
Varanium Capital, an asset management company, has announced the first close of its debut venture debt fund with a size of Rs 250 crore. The fund aims to invest in approximately 100 startups using a combination of revenue-based financing and traditional venture debt strategies. It has already secured an anchor investor and received commitments from family offices, ultra-high-net-worth individuals (UHNIs), and prominent entrepreneurs, including former CEOs and CXOs of banks.
The debt fund will be managed by Nawal Bachhuka, who is a principal at Varanium Capital and part of the ex-senior management team of IndusInd Bank. This team includes former CEO Romesh Sobti, former Chief Risk Officer KS Sridhar, former Head of Corporate Lending Suhail Chander, and former Chief Operating Officer Paul Abraham. The investment committee responsible for decision-making will consist of TS Anantakrishnan, the founder of Varanium Group, Aparajit Bhandarkar, a venture capital partner, Suhail Chander, and KS Sridhar.
This initiative by Varanium Capital reflects the growing interest in venture debt as an alternative financing option for startups. By offering a mix of revenue-based financing and traditional venture debt, the fund aims to support a diverse range of startups and provide them with the necessary capital to fuel their growth and expansion plans.
According to TS Anantakrishnan, the Founder of Varanium Capital, the venture debt fund will provide financial support to startups operating in sectors such as Direct-to-consumer (D2C), Software as a Service (SaaS), B2B commerce, and fintech. These sectors often require capital infusion to scale their operations and expand their market presence.
Additionally, Anantakrishnan mentioned that the fund will have a green shoe option of Rs 50 crores. A green shoe option allows investment funds to raise additional capital beyond the original target corpus, taking advantage of investor interest in backing the fund.
Varanium Capital, as a company, manages approximately $1 billion of assets across various asset classes, including structured debt, portfolio management services (PMS), and venture capital funds. With its venture debt fund and other offerings, Varanium aims to provide a comprehensive range of financial solutions to startups and companies in different stages of growth.
These developments highlight Varanium Capital’s focus on supporting startups in key sectors and its ability to manage a diverse portfolio of assets across different investment categories.
Varanium Capital’s fintech-focused equity fund has made investments in 12 startups, including Easebuzz, Riskcovry, Finvu, and Homeville. These investments reflect Varanium Capital’s strategic focus on supporting fintech startups and fostering innovation in the sector.
The investment comes at a time when the startup ecosystem is experiencing a funding slowdown, leading investors and startups to explore alternative channels for capital infusion. Venture debt funds, such as Stride Ventures, Innoven Capital, Alteria Capital, and Trifecta Capital, have emerged as popular options for startups seeking non-dilutive financing and investors diversifying their portfolios.
By backing promising fintech startups, Varanium Capital’s equity fund aims to provide financial support, mentorship, and industry expertise to help these companies scale their operations and drive innovation in the fintech sector.
These developments highlight the increasing importance of venture debt funds and alternative channels of capital flow in the current startup ecosystem, as well as Varanium Capital’s active involvement in supporting fintech startups and contributing to their growth.
According to the India Venture Debt Report 2023 by Stride Ventures, the venture debt market in India witnessed significant growth in 2022. A total of $800 million in venture debt was disbursed to approximately 120-130 companies through 170-180 deals. This marked a notable increase compared to the $538 million venture debt disbursed in 2021, reflecting the growing popularity of venture debt as an alternative financing option for startups in India.
In terms of sector distribution, the fintech sector accounted for the largest share of venture debt deals, representing 31% of the total. The consumer space followed with an 18% share, and the retail technology segment recorded 10% of the deals.
Furthermore, the report highlighted that 51% of the venture debt amount deployed in 2022 was directed towards Series D and beyond deals. This indicates that mature startups in later stages of funding rounds were significant beneficiaries of venture debt financing.
These findings from the India Venture Debt Report highlight the increasing importance of venture debt as a financing option for startups in India. The growing availability of venture debt and its deployment in various sectors demonstrate its role in supporting the expansion and growth plans of startups, particularly in the fintech sector and companies in later stages of funding.
