Singapore-based Lighthouse Canton (LC) has marked the first close of its maiden India-focused venture debt fund at ₹ 155.4 crore (about $19 million).
The firm launched the LC Venture Debt, a category-II alternate investment fund (AIF), worth ₹550 crore in August 2022, with a green shoe option of ₹550 crore. The fund would provide debt financing to tech startups in India.
A growing number of Indian startups are looking to raise debt amid a broader funding slowdown. Consequently, more venture capital (VC) firms are raising funds to invest as venture debt.
Last October, Edelweiss Wealth Management launched a ₹3,000 crore venture debt fund. Chennai-based Anicut Capital is looking to mark the first close of a ₹1,500 crore fund, its third debt fund, by April. Alteria Capital marked the first close of its third fund at ₹ 1,000 crore in October.
“Lighthouse Canton aims to invest in Series B and C rounds of startups through this fund, with an average ticket size of ₹10-20 crore,” Ankit Agrawal, director, venture debt, at LC said.
“We’ve been seeing quite a lot of demand for debt capital in this region,” added Sanket Sinha, global head of asset management, LC. “Considering the macroeconomic environment, where founders are looking for non-dilutive sources of funding and given how under-penetrated venture debt in India generally is compared to more mature markets (in US and Europe), we felt this is the right time,” Sinha said.
LC’s move to launch the venture debt fund follows the closure in August of its debut VC fund at $40 million set up in partnership with Nueva Capital. It has applied with the regulator for a ₹50 crore extension of the fund, which was oversubscribed.
“As the pace of venture capital activity continues to grow, it is logical that we would see a rise in venture debt demand,” said Sinha. “Given the growth of the venture ecosystem in India, we see significant opportunity for venture debt and expect the size of this market to grow 3-4x in the next five years,” he said.
In comparison to the debt fund, LC’s VC fund is focused on investing in pre-Series A and Series A startups in India. So far, the firm via its debt fund has invested in three companies, with two more in the pipeline, the firm said. It intends to deploy the capital across 35-40 firms in the next two years across sectors.
“We like companies, which are closer to being profitable, and if not, then have a clear visibility on whether profitability would be achieved,” said Sinha, adding that the fund would consider factors such as revenue, profitability, capitalization, working capital among others before investing.
LC also has a venture debt fund in Singapore, where it aims to invest about Rs 200-250 crore.
“Given that our venture debt strategy is regional, we can also support a startup with aspirations to expand out of the domestic market,” said Agrawal. “Our presence in other markets uniquely positions us to partner with companies with international expansion plans and help them with their financing needs,” he said.
LC has offices in Singapore, Dubai, and India, and oversees over $ 3 billion worth of assets under management and advisory. Its VC firm has made more than 25 investments across companies such as Redcliffe Labs, Saveo, RevFin, and Financepeer in its portfolio.