Venture debt firm Trifecta Capital marks final close of Fund III at $213 m

Trifecta Capital launched the third venture debt fund in September 2021

Venture debt provider Trifecta Capital has marked the final close of its third debt fund at $213 million (Rs 1,777 crore), two years after the firm launched the fund, with an aim to raise $200 million. The venture debt company, through the new fund--Venture Debt Fund III--has already invested Rs 1,500 crore or about $180 million in 51 companies, it said in a statement. Trifecta Capital had marked the first close of the fund in November 2021. For venture capital and venture debt companies,  the first close marks a milestone post which these companies start deploying capital.

Venture debt is a loan arrangement from a lender to a startup without the dilution of shareholding. It is usually given alongside an equity raise or within a few months of a round closing.

With the new fund closing with a corpus of Rs 1,777 crore, Trifecta Capital now has raised nearly Rs 5,000 crore across its three venture debt and one growth equity fund, it said.

The new fund saw participation from both existing and new investors including some large global financial institutions, domestic conglomerates, banks, insurance companies, development financial institutions, public sector entities, and family offices. The venture debt firm said that it expanded its global presence with twice the number of offshore individual and institutional investors as compared to its second fund.

Management view

“We are grateful to our investors who have supported us in achieving this significant milestone. We will endeavour to deliver best-in-class returns while at the same time focusing on the preservation of capital that is a critical element of this asset class," said Nilesh Kothari, Managing Partner, Trifecta Capital.

Trifecta Capital said that the fund has a provision to recycle capital, which means that its limited partners have an option to reinvest in the fund. If the venture debt company exercises this option, then the fund will have an investible corpus of $535 million or about Rs 4,400 crore.

Trifecta's new fund comes at a time when venture capital and private equity investing in India has dropped significantly amid macroeconomic headwinds. Consequently, startups are exploring raising funds through venture debt. Last year, demand for venture debt had stayed strong despite equity investing dropping sharply compared to 2021, with companies raising over $200 million through venture debt.

Even in 2023 demand for venture debt seems to have remained strong. In the first nine months, startups have raised $172 million across 17 deals through venture debt, compared to $211 million raised in the whole of 2022 across 44 deals.

Funding strategy

However, Trifecta Capital said it has been "selective" in deploying capital in the last 21 months.

"Our clear focus on selecting great founders, businesses with sound unit economics, and strong equity investor backing have helped us deliver consistent returns from our venture debt funds and grow the asset class as a whole, despite all externalities," said Rahul Khanna, Managing Partner, Trifecta Capital.

"We will continue to be reliable partners to ambitious start-ups building sustainable businesses with a long-term vision,” he added.

Founded in 2015, Trifecta Capital has invested nearly Rs 5,000 crore in 150 plus start-ups across Fund-I, Fund-II and Fund-III. The portfolio includes 21 Unicorns and more than 12 Soonicorns, with marquee businesses including Zepto, Big Basket, Pharmeasy, Cars24, Vedantu, Infra.market, among others.