At the IVCA Conclave 2023 held by the Indian Venture and Alternate Capital Association (IVCA) in March, a top investor touted venture debt as India’s “sleeper success story”. It’s an asset class whose time has come, he said. 

Emerging from the shadows of its more prominent cousin—venture equity—debt has finally found its rightful place in the cap tables of India’s high-growth startups. So much so that venture debt investments in the country touched ~$1 billion in 2022, having grown 22% since 2019, according to BCG. 

More than 100 venture debt deals were closed last year, with an average cheque size of $7 million, as the asset class grew in acceptance amongst founders and investors. 

“Today, even equity investors are encouraging their portfolio companies to complement an equity round with some venture debt. So, if a company did a $10 million equity round, founders are looking to top it up with a $3 million debt round,” Ashish Sharma, Managing Partner of InnoVen Capital (India), tells us in the latest edition of ‘CapTable Conversations’. 

Sharma is at the helm of India’s oldest venture debt provider InnoVen (backed by Singapore’s Temasek), which has deployed over $850 million in capital across 200-plus startups, with 36 unicorns in its sprawling portfolio. He warns that “venture debt is not a substitute for venture equity” even though the prolonged funding winter has made debt rounds more ubiquitous than ever before.

These are the edited excerpts of the conversation: