Stride Ventures has launched the second edition of the India Venture Debt Report. The report highlights the potential of B2B replacing Fintech in 2023 for the most attractive sector for venture debt, closely followed by Consumer and EV. Further, the survey accentuates the investor sentiments of venture capitalists (VCs) and startup founders with respect to various factors driving the venture debt ecosystem. The survey was conducted with 150 Startup Founders and Venture Capital firms (VCs).

Key survey findings

The survey found that in 2023, 82% of founders said they will strive for profitability and prioritize scaling their startups, while 79% of VCs expressed a focus on profitability, and 21% want to focus on growth. This is in contrast to 2022 when 55% of VCs and 68% of founders focused on growth rather than profitability.

The survey also revealed that 71% of founders of early-stage companies plan to raise venture debt in 2023, compared to 50% of late-stage founders and 20% of growth-stage founders. Additionally, 74% of VCs surveyed would recommend their portfolio companies to take on venture debt in 2023. In 2022, 100% of growth-stage founders were certain of raising venture debt, compared to 86% of early-stage founders and 67% of late-stage founders.

The survey results also highlighted that 62% of founders and 44% of VCs consider “engaging with bank limits” as the most important value-added service offered by a venture debt fund, with “advisory on corporate financial services” being the second most preferred service for 28% of founders and 33% of VCs. This is a change from 2022, where advisory on corporate financial services was considered the most important value-added service, followed by “engaging with bank limits”.

Finally, the survey indicated that Agritech, Healthtech, and SaaS sectors are receiving fewer venture debt prospects according to founders and VCs. These findings suggest that founders and VCs in India are prioritizing profitability and seeking venture debt as a means of achieving growth, while also valuing value-added services from venture debt funds.

Ishpreet Singh Gandhi, Founder and Managing Partner, Stride Ventures, said, “Venture Debt has become one of the key growth enablers for Indian startups. The rising awareness of this asset class and positive investor outlook has enabled Venture debt to more effectively showcase its non-dilutive characteristics and capacity to unlock growth.

This edition of our Venture Debt report delivers both a macro and micro perspective on the startup landscape. The survey report gives an overview of sentiments for key stakeholders, offering an actionable outlook on what to expect from India’s venture debt ecosystem in 2023,”

Key insights from the report:

The venture debt ecosystem in India is thriving, with a 2.6 times increase in the debt amount disbursed from 2019 to 2022. The report indicates that Series D and startups beyond that stage raised the most debt in 2022, while pre-Series A stage startups completed the highest number of debt deals.

Geographically, the report recorded Delhi NCR as the most active location for venture debt deals in 2022, followed by Bangalore and Mumbai. Out of a total of 170-180 venture debt deals recorded in 2022, the FinTech sector emerged as the leading sector with 31% of the share, followed by Consumer and Agritech sector startups.

The B2B Commerce sector was noted as being behind the Fintech sector in the amount disbursed, with both sectors accounting for more than 70% of venture debt transactions in India. These findings indicate a positive trend in the Indian venture debt market and highlight the potential for growth and investment opportunities in the region.