(From left) Vinod Murali, Ankit Agarwal, Ajay Hattangdi and Punit Shah, partners at Alteria Capital.
Alteria Capital said on April 9 that it has raised Rs 1,325 crore for its second fund to provide loans to startups, the latest sign of the startup funding frenzy underway in India and indicating huge demand for experienced fund managers.
Alteria has marked a so-called ‘first close’, which allows it to start investing from the fund, even as it continues raising more money in parallel for the fund. It is aiming for a final close of about Rs 1,700 crore in the next 3-4 months.
“100 days of Zoom calls with over 200 investors,” is how Vinod Murali, co-founder and managing partner sums up the experience. “I was definitely surprised by the sheer speed of the fundraise. This is significantly higher than we had expected to raise by now,” he said.
Investors or limited partners of the fund include high net worth individuals, family offices and some institutions, all from India. Raising over a Rs 1,000 crore locally this fast also indicates that domestic capital is beginning to look at the startup scene in India more seriously.
For the longest time venture capitalists in India have been concerned that the domestic pool of capital is too shallow relative to the potential of startups and the quantum of money they raise from overseas.
Alteria’s previous LPs include IndusInd Bank, Small Industries Development Bank of India (Sidbi), Azim Premji Foundation and Flipkart co-founder Binny Bansal.
“Lots of people have moved from curiosity to action. They want to play in this space and this looks like an inflection point for domestic capital in India,” Murali says.
Venture debt firms generally lend to startups with a payback period of two to four years and an interest rate of 12-14 percent (although these terms vary case to case) in exchange for a minute equity stake or warrants in fast-growing startups, as opposed to traditional lenders who look for asset-backed guarantees.
Alteria’s 30-odd portfolio companies include milk brand Country Delight, on-demand delivery firm Dunzo, small-business lender Lendingkart, cloud-kitchen firm Rebel Foods and fintech firm BharatPe.
Founded by Murali and Ajay Hattangdi in 2018, Alteria raised a debut Rs 960 crore fund in 2019. From the larger second fund, it is also diversifying beyond venture to more structured deals- similar to a bank or NBFC. It is closing a $20 million deal of this kind currently.
Late last year, Alteria also poached two executives from venture debt firm InnoVen Capital- Punit Shah and Ankit Agarwal, and made them partners.
Moneycontrol reported on March 22 that startups are raising unprecedented amounts of money in increasingly quick periods of time- some are calling it a party, and Alteria’s fundraise is an indicator of sentiment in the ecosystem.
“There is definitely a bit of bubble and a bit of a party going on. And I think there will be a pullback, in anywhere between 6-18 months. So we will look harder for companies that are fundamentally different and founders and demonstrate leadership ability,” Murali said.
Venture debt firms effectively rely on the future venture capital that companies will raise to get back their principle and interest- something that looks easy in the current era of abundant capital.
But he said LPs were also bullish on Alteria for this fund because even at the height of the pandemic last year, the firm saw zero losses from its first fund. Every company paid back its dues.
Unlike their equity counterparts, venture debt firms can recycle capital, since their debt is paid back by companies in a couple of years. Due to this, Alteria will have about Rs 4000 crore available across the two funds to provide venture debt and structured solutions for startups.