Alteria Capital Raises $195 Million for Third Venture Debt Fund, Introduces Shorter-Duration Scheme

Mumbai, India: Venture debt firm Alteria Capital has successfully closed its third fund at Rs 1,550 crore (approximately $195 million). This new fund aims to provide financial solutions for growth-stage startups in India.

Focus on Domestic Investors and Early-Stage Startups

The Mumbai-based firm raised nearly all its capital from domestic limited partners (investors in a fund). The venture debt scheme will primarily target startups that have already secured venture capital funding of up to Rs 200 crore each. Alteria Capital boasts an impressive portfolio, having previously backed companies like Rebel Foods, BlueStone, OneCard, Ather Energy, and Captain Fresh.

Early Deployment and Expansion Plans

The venture debt fund has already deployed 50% of its committed capital across various portfolio companies. These include OneCard, Renee Cosmetics, Samunnati, BlissClub, Rebel Foods, Giva, Lead School, Kissht, Captain Fresh, Traya, BlueStone, and Ather Energy.

Furthermore, Alteria Capital has launched a shorter-duration scheme as part of the overall fund. This scheme caters to startups seeking short-term funding solutions and is expected to close by the end of 2024.

Consumer & Fintech: Top Sectors for Venture Debt

According to a February 2023 Economic Times report, the consumer and fintech sectors emerged as the top recipients of venture debt funding in India last year. This trend is reflected in Alteria Capital's focus on these sectors, particularly with the launch of their shorter-duration scheme.

Shorter-Duration Scheme: Addressing Balance Sheet Needs

The shorter-duration scheme targets consumer and fintech startups seeking to optimize their balance sheets. "We realized there was a distinct need for short-term working capital solutions," explained Alteria Capital's managing partner, Vinod Murali. He highlighted that these situations don't necessarily require a 3-year loan but rather a 12-15 month repayment window.

Reduced Risk and Faster Returns

Murali further clarified that due to the shorter duration, the risk profile associated with the shorter-duration scheme is lower. This translates to slightly lower returns compared to a typical venture debt offering. While venture debt loans typically have a 36-month tenor, the shorter-duration scheme offers loans with a maximum term of 18 months. Additionally, venture debt funds generally take approximately six years to recoup capital and achieve the targeted 10% return rate (hurdle rate). Murali stated that the shorter-duration scheme aims to achieve this target return within a timeframe of three and a half years.

Specific Use Cases for Shorter-Duration Debt

Alteria Capital's managing partner, Ankit Agarwal, elaborated on the specific use cases for the shorter-duration scheme. He identified rapidly growing startups in the consumer and fintech sectors that encounter unexpected working capital needs as a primary target audience.

Agarwal explained that traditional equity capital or venture debt funding primarily focuses on runway extension or reaching the next funding milestone. However, the critical need for managing short-term working capital requirements can sometimes be overlooked. In such situations, especially for early-stage companies, traditional options like bank loans might not be readily available. This is where the shorter-duration scheme offers a valuable solution.

Agarwal further highlighted another use case within the fintech sector – consumer lending companies seeking capital to extend loans to their customers. Finally, he mentioned that the targeted return for the shorter-duration scheme is approximately 13%, compared to the minimum 16% return for a standard venture debt fund.

Alteria Capital's expansion with the third fund and the introduction of the shorter-duration scheme demonstrates their commitment to providing tailored financial solutions for growth-stage startups in India. This move is expected to further fuel the growth of the venture debt ecosystem in the country.