Trifecta Capital has announced the launch of its third venture debt fund, Trifecta Venture Debt Fund – III. The Fund — with a target corpus of Rs 1,000 crore ($133 million) and a greenshoe option of Rs 500 crore ($67 million) — will be the largest in the series of venture debt funds managed by the firm.
It aims to serve the rapidly growing financing opportunities for Indian startups, with a focus on investing in B2B marketplaces, D2C brands, and SaaS startups. In 2021 alone, the Indian startup ecosystem has seen 24 new entrants to the unicorn club, and has attracted $26 billion in equity financing in the first eight months of 2021.
Trifecta Capital aims to complete the first close in CY 2021 and begin deployment simultaneously with a healthy pipeline of credit opportunities that have already been identified.
“The startup ecosystem didn’t skip a beat with COVID-19. As an ecosystem we have lived through everything that could not be put in an excel sheet. As a venture debt fund we have put in Rs 2,200 crore across 80 companies. We have over 11 unicorns in our portfolio, and probably we will have 10 more in the next 12 months. This creates great feedback loop and reference,” said Rahul Khanna, Managing Partner, Trifecta Capital in a conversation with YourStory.
Rahul Khanna, Managing Partner, Trifecta Capital
He added, “As capital becomes a commodity, Net Promoter Score (NPS), becomes important in our business as well.”
Trifecta Capital pioneered the nascent asset class of venture debt funds in 2015 by financing early-growth and growth-stage startups via the country’s first venture debt fund. This fund is now in its seventh year and has delivered consistent returns on a quarterly basis through some very challenging years for the Indian economy. The firm’s portfolio is cumulatively valued at $33 billion today.
“Our first fund was in 2015, of Rs 500 crore, and it has returned over 100 percent of the corpus to its investors and is now harvesting the gains. Fund II was Rs 1,000 crore, and now we are targeting Rs 1,000 crore with a Rs 500 crore greenshoe option,” said Rahul.
While traditionally, Trifecta Capital’s forte has been in providing venture debt to startups, it’s forayed into equity funding early this April with Trifecta Leaders Fund II.
This has also built a comprehensive tech platform last year to give startups customised treasury management — advisory, execution of funds, monitoring, and rebalancing; early vendor payment systems — payable management, debt structuring for vendors and dealers, working capital financing; and integrated AR and AP platform — digitised receivables and payments reconciliation.
Backed by its distinctive track record, Trifecta Capital is witnessing strong and continued interest in Venture Debt Fund — III from investors in its prior funds which include banks, insurance companies, development financial institutions, corporate treasuries, and endowments, as well as several of India’s largest Family Offices.
Buoyed by this investor support, the firm is also forging new partnerships with some large global financial conglomerates for capital contributions into this Fund.
In a statement, Nilesh Kothari, Managing Partner, Trifecta Capital, added, “In our two existing venture debt funds, we have been extremely selective on the companies that we have chosen to partner with, and creative in how we structure solutions to serve them. The quality of our portfolio is a testament to this approach, as we invested in less than 1 out of 10 opportunities that we evaluated, and now have a portfolio with more than 20 unicorns and soonicorns. In this new fund, we will continue to select the very best, and further innovate on the right credit products for them, as we are strong believers in the potential of these businesses to scale and contribute to nation-building.”
Trifecta will offer customised solutions woven around growth financing, with creative mechanisms of risk sharing, working capital financing for inventory and receivables, bespoke capital structured to fund acquisitions, as well as blended financing structures along with participation from banks and NBFCs.