This preference reflects a growing recognition of the strategic advantages that venture debt offers, particularly in capital-intensive and rapidly evolving sectors.The venture debt market in India is growing steadily, mirroring the early days of venture capital, especially in emerging startup sectors such as financial technology and electric vehicles (EVs), a report showed on Thursday.
Indian founders are increasingly turning to venture debt to plug funding gaps and avoid excessive equity dilution, according to the report by global investment institution Lighthouse Canton.
This change is mainly due to the scarcity of equity financing in the market and the desire to preserve ownership while accessing the capital necessary for growth.
The report states that the main reason founders prefer venture debt over traditional debt and equity is its less dilutive nature (40%), with flexibility in repayment schedule also being an important factor (30%). ).
This preference reflects a growing recognition of the strategic advantages that venture debt offers, particularly in capital-intensive and rapidly evolving sectors.
“The startup ecosystem in India holds immense potential, and the growth of subprime debt financing plays a central role in driving its development,” said Sanket Sinha, Managing Director and Global Head of Asset Management at Lighthouse Canton.
“We believe that this mode of financing will be key to fostering innovation and empowering startups, which will ultimately drive sustainable growth in the country’s dynamic and evolving business landscape,” he added.
India’s fintech sector, now the third largest in the world, continues to be a major driver of venture debt adoption. Innovations like UPI have propelled the Indian fintech market forward, with venture debt playing a vital role in helping fintech startups manage cash flow, support subsequent loans and fuel their growth.
The electric vehicle sector, capital-intensive and facing unique challenges, has also become heavily dependent on venture debt to drive growth.
According to the report, about 67% of electric vehicle startups rely on venture debt for more than half of their business. debt financing.
“With traditional lenders like banks often viewing the electric vehicle sector as high risk, subprime debt provides a vital alternative,” the report said.
