It is an exciting time for venture debt, as an asset class. Its growth is set to see an acceleration, as valuations and equity cheques slide across the venture ecosystem due to the ripple effects of the Covid-19 pandemic.
The venture debt sector is nascent in India, with only a handful of players, but Stride Ventures has not only tackled the impact of Covid on this sector but capitalised on it, with a series of investments through the lockdown. Launched in July 2019, Stride has funded 10 companies so far. With a target corpus of Rs 350 crore, it is set to close its first fund in the coming months. Ishpreet Singh Gandhi, founder and managing partner, Stride Ventures, tells Sudhir Chowdhary about Stride’s investment strategy in the Covid environment. Excerpts:
What is the corpus size of your first fund?
Stride’s maiden fund has a target corpus size of Rs 350 crore with a greenshoe option to raise an additional Rs 150 crore. The fund has recently a commitment of up to Rs 85 crore from SIDBI. We expect to close the fund in December 2020. Our goal is to become an all encompassing institution for all credit solutions for a startup. The partners have deep domain expertise across corporate banking and help the portfolio companies leverage their banking network. The fund works closely with various foreign and domestic banks to provide comprehensive credit solutions.
What is the average size of your funding in a startup? How much interest do you charge startups and what is the repayment tenure?
Stride’s ticket size ranges from Rs 5 crore to Rs 20 crore. The interest rate is 15-17% depending on each deal. Our maximum tenor does not exceed 18 months. Within that, we provide flexible tenors to our portfolio companies, mirroring their requirements. We do not follow a one-size-fits-all approach. However, the aim of the fund is to become long-term strategic partners with startups and innovate continuously to cater to the distinctive requirements of each startup.
How many startups have you funded so far? Are you sector-agnostic?
Stride has funded 10 companies so far. We have two more term sheets signed which would take our portfolio to 12 companies soon. We are sector-agnostic. We have a well-diversified portfolio spread across sectors: Stellapps (end-to-end dairy tech company using data analytics to improve quality; SUGAR (colour cosmetics brand); Miko (robotics company); LetsTransport (urban logistics service provider); Bulk MRO (B2B marketplace for industrial supplies); Ziploan (online lending platform for SMEs); HomeLane (interior design solutions).
How has the pandemic impacted investments and fund raising?
It is an exciting time for venture debt, as an asset class. Its growth is set to see an acceleration, as valuations and equity cheques slide across the venture ecosystem due to the ripple effects of the Covid-19 pandemic. Furthermore, no delays or defaults in the portfolio in addition to flexible structuring of our debt products have led to a considerable increase in deal flow. This has allowed us to cherry-pick high quality startups where we would like to invest.
Towards fund raising, while investors are wary due to the current uncertainty venture debt has witnessed increased demand as startups look to delay further equity rounds. We have capitalised on the opportunity and have been active in our deployments. Furthermore, our model has been validated by our banking partners, who work closely with us and our portfolio companies. This has vastly bolstered investors’ confidence. Hence, there has been no adverse impact on fundraising.
From whom do you typically raise funds?
Our investors are a mix of HNIs, family offices and institutions, both domestic and international. Our team, which is a mix of experienced bankers and VCs, ensures that our capital is well-protected while having a strong equity upside.