In 2023, 71 per cent of founders of early-stage companies are confident about raising VD, compared to 50 per cent of late-stage founders and 20 per cent of growth-stage founders, according to Ishpreet Singh Gandhi, Founding & Managing Partner of Stride Ventures.
Stride is a venture debt firm that provides customised debt solutions to start-ups across sectors like consumer internet, fintech, SaaS, and B2B. Last month, Stride announced the first close of its third venture debt fund at $100 million and expects the final close of $200 million to take place in the next three-four months.
businessline spoke to Ishpreet Singh Gandhi, Founding & Managing Partner of Stride Ventures about their new fund and the ongoing trends in the venture debt market. Stride’s portfolio companies include SUGAR Cosmetics, The Good Glamm Group, Mensa Brands, Exotel, Yubi, HealthifyMe, and Waycool, among others.
How is the demand for debt funding in the current market as compared to 2021 and 2022?
In comparison to 2021 and 2022, the demand for debt funding in the current market has shown some interesting trends. Firstly, the total venture debt disbursed in India in 2022 increased significantly by nearly 2.6 times compared to 2019, reaching approximately $800 million. In 2021, venture debt disbursals amounted to around $538 million. This represents a substantial growth in debt funding in recent years, noting approx 33 per cent from 2021 to 2022.
Regarding venture debt (VD) funding, sentiments differ across different stages of companies. In 2023, 71 per cent of founders of early-stage companies are confident about raising VD, compared to 50 per cent of late-stage founders and 20 per cent of growth-stage founders. However, in 2022, all growth-stage founders were certain about raising VD, while 86 per cent of early-stage founders and 67 per cent of late-stage founders shared the same sentiment.
Which are the sectors where you see more funding demand in this market environment?
In the current market environment, there is significant funding demand in several sectors. The B2B sector holding 26 per cent is the most trending one, attracting funding to address market expansions. In second place is the Consumer sector holding 24 per cent, attracting investors due to their innovative products and strong consumer appeal. The EV sector is also in demand as environmental considerations evolve and holds 23 per cent, followed by the FinTech sector which is experiencing high funding demand due to the increasing adoption of digital payment solutions, lending platforms, and investment apps, and holds 11 per cent.
Has your due diligence changed in any way in the ongoing funding slowdown?
Our dedication to due diligence has remained steadfast and has grown more rigorous over time. We continue to thoroughly assess various aspects of the company, including the background of investors, founder pedigree, professional experience of key management personnel, target market size, unique problem-solving approach, differentiation from existing market offerings, financial analysis, cash flow projections, unit economics, a path to profitability, and long-term sustainability of the business model. Additionally, we have introduced additional audit checkpoints to ensure the establishment of robust corporate governance within the companies.
What led to the inception of StrideOne and how much credit have you disbursed through it?
As a tech-led financial services platform, StrideOne aims to reduce technological and financing gaps for start-ups and their ecosystem partners. It focuses on providing customised financial solutions to MSMEs (Micro, Small, and Medium Enterprises) and supply chain partners of start-ups. Over the last eight months, StrideOne’s disbursement volume has crossed ₹2,000 crore.