Venture Debt Firm Trifects Capital launches $200 million Third Fund

Trifecta Capital, a venture debt firm, is launching a $200 million third fund to lend to rising companies in a variety of industries. The debt fund comes only months after the company announced the creation of a Rs 1,500 crore late-stage equity fund to capitalise on the sector's expanding pre-IPO potential.

According to Rahul Khanna, managing partner of Trifecta Capital, the fund would be raised from most returning investors as well as some new global and domestic organisations.

“From the initial conversations we had with our investors, the response has been very encouraging. Most of the LPs (limited partners) will return with larger cheques. We will also selectively include new investors from the domestic as well as global markets,” Khanna said.

The firm announced the full closing of its second fund, which it began raising in 2019, earlier this year. A venture debt fund invests in businesses alongside equity investors, assisting them with working capital and other debt requirements.

In exchange for the debt, these funds receive a modest ownership stake in the company, which provides them with equity upside if the company's valuation grows.

Trifecta was one of the first few venture debt funds in India, having launched in 2015 with a Rs 500 crore first fund and counting unicorns like BigBasket, Infra.Market, Cars24, ShareChat, and Vedantu among its portfolio firms.
“We have returned the entire capital from the first fund with almost 17% IRR (internal rate of return) to our investors,” said Nilesh Kothari, co-founder and managing partner, Trifecta Capital. “We expect our fund 2 performance to be better with IRR more than that of the first fund.”

Trifecta plans to close the fund by the end of 2022, aided by a surge in market liquidity. “We will be able to deploy this capital over the next three to four years,” said Khanna.

A venture debt fund can typically invest more than the total cash it has received due to the cyclical nature of the capital deployed.

In the last five years, India has experienced an extraordinary increase in venture loan investment.

Alteria Capital, Blacksoil, Stride Ventures, InnoVen Capital, and Anicut Capital are among the firms that have carved out a niche in the industry.
According to data from Venture Intelligence, the amount of money raised through venture debt reached a 25-quarter high in the January-March quarter of 2021.