Start-ups looking to tap into venture debt, avoid large funding rounds

Start-up founders are now looking to raise funds through venture debt or at least have some debt element mixed with their current small-ticket funding, as bigger rounds are expected to be delayed owing to the Covid-19 pandemic.

Besides, most start-ups are also not expecting to get the right valuation at this time, as the lockdown imposed to curb the virus’ spread has severely disrupted businesses.

“We have done five transactions in the last four weeks and the average size was around Rs 20 crore each,” said Nilesh Kothari, co-founder and managing partner of Trifecta Capital, a venture debt fund. “Venture debt is also gaining demand because some businesses are down 30-50 per cent, and the founders are deferring big equity raises by at least 12 months to get proper valuations.”