Global investment institution Lighthouse Canton has announced the first close of its venture debt fund, a Category II AIF, at Rs 155.4 crore. The fund, which has a capacity of Rs 550 crore and a greenshoe option of additional Rs 550 crores, is part of Lighthouse Canton’s regional venture debt strategy. The fund has seen participation from onshore and offshore institutions and family offices.
The fund will look to provide venture debt capital to technology-enabled startups that are part of the Indian startup ecosystem. For companies with sound business models and viable unit economics, venture debt is an alternative source of growth funding, which is gaining traction amongst Indian companies now.
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“As the pace of venture capital activity continues to grow, it is logical that we would see a rise in venture debt demand,” said Lighthouse Canton’s Global Head of Asset Management, Sanket Sinha.
“In more mature venture ecosystems such as the US and Europe, venture debt has risen to 15-20% of the total VC funding, whereas this proportion is less than 2% in India. Given the growth of venture ecosystem in India, we see tremendous opportunity for venture debt, and we expect the size of this market to grow 3-4x in the next five years,” Sinha added.
Ankit Agrawal, director, Lighthouse Canton, further added that the fund expects to deploy the dent capital in the next two years across 35-40 companies in India alone.
In recent years, India’s startup ecosystem has witnessed a boom, attracting 5% of all venture capital deal flows globally last year with over $20 billion invested. At the end of 2022, there were 1,205 unicorns globally, with nearly 10% hailing from India. Today the Indian startup ecosystem is the third largest in the world, only behind the UA and China, and is poised to grow further.
FE reported last month that with a good number of startups unable to mop up equity at expected valuations in a funding winter, many have opted for venture debt to run their operations. The value of venture debt deals in India has nudged $400 million in 2022 so far, a rise of nearly 14% over last year, data from private market tracker Venture Intelligence showed. So far this year, 59 deals have been struck compared to 67 deals in 2021.
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Lighthouse Canton has been actively building its capabilities in the venture investment space, and this is the second Fund launched this year focused on the Indian startup ecosystem. Earlier this year, Lighthouse Canton partnered with Nueva Capital to launch its maiden venture capital fund, LC Nueva, focused on pre-series A and series A companies in India. The fund was oversubscribed and successfully applied for an additional Rs 50 crores with the regulator.
Headquartered in Singapore, Lighthouse Canton is a global investment institution with wealth and asset management capabilities. The firm has over 100 experienced professionals in Singapore, Dubai and India, and it oversees over $3 billion worth of assets under management and advisory (as of September 30, 2022).