When should I raise venture debt?
This is a question for which the answer really depends on the founder seeking funds. The founder will have to customize his approach to answer this question. Here are a few situations where it appropriate to raise VC funding:
1. To replenish Cash reserves of an enterprise to reach the next organizational milestone. For example if you have raised 50 crore rupees and need 20 crore more to hit the next major milestone.
2. Funding Capital expenses which are significantly and unavoidably larger, for example in case of acquisitions.
3. Reserve funds to act as a buffer in case it is predicted to take longer to hit the next organizational milestone.
When should I avoid venture debt?
In some situations the founder should seriously reconsider or totally steer clear of venture debt. Here are a few examples
1. It isn’t realistic to expect debt repayment
2. The conditions levied by the VC firm are too cumbersome and tedious.
Here are the key things to consider when raising venture debt:
1. The size of the loan
2. The time period of the loan (when does it need to be repaid?)
3. The price of the loan (what are the fees and interest rate?)
4. The covenants (what are the financial and non-financial covenants?)
5. Timing of the amortization (when do we start repaying the loan?)
What’s the best way to run a venture debt fundraising process?
To get a better understanding of the entire process it is best to interact with various banks and Venture Debt funds to analyse the capital currently existing in the organization. It is also recommended to hire a venture lawyer who has worked extensively on venture debt deals since the lawyer will be able give the soundest advice on clinching the best possible terms.
List of active VCs in India
Here is a list of top venture capital firms in India
One of the biggest and most successful Venture capital firms in the country is Helion Ventures and which has invested in over 75 start-ups while making 110 deals until now. It runs a company worth $605 (US) which is roughly equal to 4021 crore INR. This is an India focused company which invests in outsourcing, Internet, mobile, healthcare, financial services and education sectors and domains. When it comes to exits, its biggest portfolio companies include Makemytrip, along with taxi booking service TaxiForSure and bus booking service RedBus which were later acquired by Ola the cab service and Naspers Group respectively.
This VC firm was launched in December 2105 with a $30 million (US) (approximately to 201 crores rupees) fund and has gone on to invest in 83 start-ups and 105 deals so far. Its investment portfolio is diverse and is filled with portfolio companies like event booking platform Explara, warehouse automation player GreyOrange, and also hyperlocal delivery service Roadrunnr. Blume has had around a dozen exits so far for example IndianStage which was acquired by Explara, 1Click which was acquired by FreshDesk and Promptec which was acquired by Havells.
Indian Angel Network is a platform (not a VC) which has a network of over 400 angel investors in the country, and has made 92 deals so far across the globe, investing in 88 companies since its inception in 2006. Since this is a network platform for angel investors as opposed to a single VC firm, this has a wide spectrum of portfolio companies and angel investors alike. Styledotme the fashion wear enterprise, rankjunction the online education firm, hashcube, the gaming enterprise are just some of the portfolio companies which have benefitted from this platform.
This is a Bengaluru-based VC firm that has funds amounting to a total of $650 million (US) (~4,732 crore rupees). Its high priority portfolio companies include e-commerce giants Snapdeal, and Urban Ladder along with e-learning company Simplilearn and personal assistant app Haptik. Its most notable exits in India are Myntra which was acquired by Flipkart, and the mobile video delivery platform Apalya acquired by Arre, a digital media brand.
Sequoia capital has the unicorns of IT industry under it’s portfolio. This firm has invested in companies like Dropbox, Truecaller, Freecharge, BYJU’s, JustDial, Zomato and many more.
Top 5 Indian companies that have raised VC money
1) Ola
The most respected name in cab service in India today has crossed well over $500 million (VC funding) or Rs. 3,299 crores putting it into one of the highest funded Indian companies today. Handling over one million cab booking requests per day, Ola quoted a growth rate of almost 30 times over its previous year. Headquartered in Bangalore and funded by a barrage of VC firms from Matrix Partners to Sequoia Capital and Accel Partners, this company is bound to go places.
2) Paytm
One of the best mobile wallets in the business in India, Paytm is valued around $3-4 billion and has a staggering user base of 100 million. Paytm provides its users apps for shopping on most mobile platforms, and has earned a license from the RBI to set up a payments bank, empowering it to give current and savings account deposits. Headquartered in Noida VC firms such as Intel Capital and Reliance Capital have dabbled in this company.
3) Flipkart
Well known as the go to brand for e-commerce in India, Flipkart is definitely highly capitalized being valued at almost over $15 Billion. The company has given preference to its mobile model seeing enormous potential in the same. It has its Headquarters in Bangalore and has sold over 8 million items during its Big Billion day sale alone!. Major acquisitions this year include FX Mart, Appiterate, and AdIQuity. Accel Partners, Morgan Stanley and a row of others have invested in this company.
4) Snapdeal
This comes close on the heels of Flipkart and is valued at half of Flipkart’s value of $6.5 billion. Snapdeal has acquired Letsgomo Labs, RupeePower and Reduce Data amongst others. Bessemer Venture Partners, Intel Capital, Saama Capital have invested in this company.
5) Grofers
This is a popular Hyperlocal delivery platform. Grofers was in the news late November for reportedly raising $120 million (roughly Rs. 800 crores) in its series D round. The two-year-old startup acquired MyGreenBox, Spoonjoy, and Townrush, all this year. Sequoia Capital, Tiger Global, SoftBank have funded this company.
The Final Word on Venture Capital Funding
Venture Capitalism is a new breed of industry that is gaining momentum all throughout the world. The motto of this industry is to heavily invest in initial growth phases of companies and reap high profits in the short run as the company grows rapidly. This unique business model has the potential to create employment on a global scale by supporting the employers themselves leading to an all-around win-win situation. If you are a start-up and looking for VC money, now is the right time to spring into action!