Unicorn India Ventures debuts with Rs 600 cr debt fund

With an aim to provide capital to emerging startups, Unicorn India Ventures has announced its first debt fund with a corpus of Rs 600 crore.

Venture debt is a form of debt financing for venture equity-backed companies that lack the assets or cash flow for traditional debt financing, or that want greater flexibility.

“The domestic startup ecosystem is maturing. While there has been a lot of venture equity activity over the past few years, startups are still starved of funds for growth,” M. Damodaran, chairman of Unicorn India Ventures, said on Monday. He is also a former Sebi chief.

The Sebi-registered fund will invest in about 10 venture in a year with an average ticket size of Rs 20 crore.

The fund will remain invested in a venture for around eight years.

“We will make a first round of investments in the first three years, followed by a second round of investments in the next three years, and a harvesting period of about two years,” Damodaran said.

According to experts, high levels of founder dilution, uncertain exit scenarios and limited financing options have led to demand for supplemental forms of financing that provide startups with the capital they need, at a cost that makes sense.

Last year, there were Rs 700 crore investments in startups and smaller companies amassed around Rs 300 crore.

Over the past few months, some prominent startups such as furniture rental company Furlenco and online lending platform Capital Float, have floated non-convertible debts to raise fresh capital from investors, potentially paving the way for other high net-worth individuals to back startups by providing debt financing.