Fund focus: Alteria takes venture debt up a level

As a co-founder of InnoVen Capital in 2008, Ajay Hattangdi struggled to teach Indian entrepreneurs about the value of venture debt. It’s a mark of how far the market has come that more than half of the INR9.6 billion ($140 million) raised for the first fund from Alteria Capital, which he launched in 2017 with Vinod Murali, was spoken for before the vehicle even closed.

“There’s been this virtuous cycle of people experiencing venture debt and taking it to Series B and C, talking to other founders and getting their buy-in,” says Hattangdi. “In addition, these companies are maturing, equity checks are growing, and a stronger enterprise value is being built – so there’s more room for them to take debt as well as equity.”

Alteria’s Activate platform, launched last year following the fund’s first close, is expected to play a major role in portfolio development. The value-add program takes a collaborative approach by connecting entrepreneurs in the firm’s focus sectors of consumer technology and healthcare with other venture investors, large corporate players, and even other start-ups.

Activate works both from the start-up side, building connections for existing portfolio companies, and from the corporate side by helping to direct innovation programs for larger operators. The latter effort aims to identify pressure points within the corporate organization that could be solved with the application of technology.

“It’s not really about helping the corporates, it’s about being able to help the other start-ups in the ecosystem,” says Hattangdi. “They’re not all our portfolio companies and we haven’t necessarily done a deep dive on all of them, but to the extent that we can make relevant connections for these young start-ups, that’s the goal of Activate.”

The program has already made over 100 connections, which range from collaborations to acquisitions. For example, VC-backed mobile wallet developer Mobikwik acquired mutual funds platform Clearfunds last year following an Activate introduction. It also connected hyperlocal logistics player Shadowfax to a corporate player that is now a client of the start-up.

In addition to educating the entrepreneurs on venture debt, Hattangdi and Murali have worked to build awareness of the asset class among India’s institutional investors. That effort has paid off, with nearly all Alteria’s capital coming from domestic LPs. Investors include IndusInd Bank, Azim Premji Foundation, and the Small Industries Development Bank of India (SIDBI), making its largest commitment to date from the government’s Startup Fund of Funds program. 

“This is a relatively new asset class, and so it has been a learning experience for a lot of them,” Hattangdi says. “I think that’s where the experience and track record has helped – we can talk to people and give them a sense of what we have done. The immediate reaction is that venture debt ought to be a fairly high-risk asset, but when you talk about what you’ve done over the past 10 years, people start to get it.”   

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• Topics
• South Asia
• Venture
• Financing
• Fundraising
• GPs
• India
• Structured finance