Alteria Capital makes first close for $125-mn venture debt fund

Venture debt firm Alteria Capital, founded by two former executives of InnoVen Capital, announced the first close of its maiden venture debt fund. It has received commitments of $55 million (Rs 3.56 billion) for the Rs 8-billion venture debt fund, with a greenshoe option of Rs 2 billion. 

The money was raised from institutional investors and family offices, including IndusInd Bank and a large family office foundation who came as the anchor investors in the fund. The fund plans to make its first two debt investments by the end of March, the fund said in a statement.

There’s a lot of interest from banks to invest in venture debt as it can offer 10-12 per cent in post-tax returns with potential equity upsides. 

Alteria is planning to raise a total of $125 mn with a green-shoe of a further $30 mn which will make it a venture debt provider with the largest corpus in India. The fund hopes to rope in other domestic and foreign investors and achieve the final close in second-half of 2018.

The fund promoted by veterans Ajay Hattangdi and Vinod Murali, former honchos at Temasek-backed InnoVen Capital, will use the capital to back start-ups that have already raised VC funding and provide them with specialty debt solutions that are complimentary to equity capital. The fund will target start-ups across early and growth stages with cheque sizes ranging up to Rs 1 billion. 

The approach is aimed at giving start-ups access to debt that is generally not available through traditional commercial debt providers. The fundraise was supported by Avendus Wealth for placement to the domestic family office segment of investors.

“This is an exciting time for the venture debt asset class which has matured substantially since we introduced the concept in India more than a decade back (as part of Innoven),” said Ajay Hattangdi, co-founder and managing partner, Alteria Capital. 

“We have been fortunate to have funded some of India’s most exciting and innovative emerging companies over the past decade. At Alteria Capital we will continue to seek out exceptional  management teams and work with investors to help realise the potential of their business ideas their growth through a range of debt solutions.”

“Venture debt is an interesting alternative investment option for investors as it provides a safe and predictable return with equity upside as well,” said Vinod Murali, co-founder and managing partner at Alteria Capital. “The demand for venture debt has been steadily increasing as more entrepreneurs have experienced the product and it is applicable across various end-uses like working capital, capex, acquisition finance and other special situations. We are on the verge of finalising our first two debt investments which we expect to consummate by the end of March.”

“This investment in Alteria will help us support the start-up ecosystem and entrepreneurs to get access to credit as a part of our Impact Investing initiative. The partnership model makes the funding structure less risky for the bank as Alteria has demonstrated expertise in this space,” said Roopa Satish, who heads the Corporate and Investment Bank and has recently announced the launch of Impact Investing in IndusInd Bank.

Alteria Capital’s founding team of Hattangdi and Murali have worked together for over a decade and were largely responsible for driving the success of InnoVen Capital taking it from a start-up in 2008 to a business which by the time they left in 2017 had funded over $225mn across 100+ start-ups.