Venture debt firm Trifecta brings RBL Bank as anchor investor, ups fund size to $64M

Venture debt firm Trifecta Capital has raised Rs 50 crore ($8 million) from RBL Bank (formerly Ratnakar Bank) and has pushed up the total target corpus of its maiden fund by a third to Rs 400 crore ($64 million), a top company executive said on Thursday.

The fund, which has been registered as category II AIF (normally associated with private equity firms) under SEBI's new norms, has brought RBL Bank as an anchor investor and says it has already got commitments of around Rs 200 crore.

“We expect to have a first close in 60 days which is likely to be up to 60 per cent of the total fund size,” Rahul Khanna, co-founder of Trifecta Capital, told VCCircle.

Currently, the firm is in discussions with private insurance companies, corporates and family offices to raise more money.

Its maiden fund will focus on providing structured debt to high growth startups that have raised Series A or B rounds of equity funding. The fund plans to deploy around Rs 125-150 crore per annum.

The Indian VC ecosystem has grown significantly in the last decade. In 2014, VC funds invested $2.1 billion, an increase of 47.7 per cent from 2013 when they brought in $1.4 billion, according to data compiled by VCCEdge, the financial research arm of VCCircle.

“Venture debt has at least Rs 1,000 crore demand in India which is being met only by Silicon Valley Bank at present,” Khanna said, adding, “Even if they and we together service annually, only about a third of that demand will be met.”

The firm is also actively looking at hiring and ramping up its office. It plans to add 8-10 people to the fund as principals, associates and finance controllers. As of now, the fund is run by Khanna, former managing director at Canaan Partners India, and another co-founder Nilesh Kothari.

The debut fund will invest across asset classes that attract venture capital money including e-commerce, cloud and internet-of-things. Trifecta's first fund will have a tenure of seven years and provide debt along with or after a company has raised money from venture capital funds.

“We are actively following 8-10 venture funds and already many funds are asking us to look at their portfolio companies for debt financing,” Khanna said.

The firm also has an equity kicker in the form of cashless warrants which it uses after the company has increased in value. “Along with the equity kicker, we target a return in low 20s,” Khanna said.

The firm will target to re-invest its money received in the form of interest repayment from companies and invest a total of Rs 700 crore of the targeted Rs 400 crore size. “After first three years of interest repayment, we shall re-invest the money by lending to other firms and hence double the fund size,” he said.

While the venture debt asset class is relatively new in India, it’s a significant component of the venture capital ecosystem in the US as well as Europe, comprising 10-15 per cent of all venture capital deployed on an annual basis, according to the company.

(Edited by Joby Puthuparampil Johnson)

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