The key takeaway: Almost ALL of this capital has come from domestic investors 🤯
Thus far, most of the $$ to invest (equity or debt) into Indian startups has come from foreign investors (e.g. pension funds, endowments etc).
But, it seems to be changing ⤵️
(1) Venture Capital (i.e. equity) dollars are still driven by foreign investors
- e.g. Blume's Fund IV had ~40% domestic LPs, rest foreign investors
(2) But, Venture Debt (i.e. credit offered to startups) is a lower risk profile viz Venture Capital (equity financing for startups)
- We're seeing these debt funds being subscribed heavily by domestic LPs
- Even for Alteria's peer Trifecta Capital, ~85% of their ₹1750 Fund III came from domestic LPs
(3) Debt is often the stepping stone to get into equity
- Especially Venture Debt, the return profile of ~16% IRR is quite close to large cap Indian equity returns
- It is only a matter of time until Indian domestic LPs graduate from Venture Debt to Venture Capital.
➡️The theme of domestic capital superseding foreign capital has played out in Indian public markets, would expect to see this in our private markets too!
hashtagindia hashtagstartups hashtagventurecapital
This post was originally shared by Rahul Mathur on Linkedin.