India’s venture debt (VD) market has reached a significant milestone, surpassing the billion-dollar mark and signaling a new era of financial innovation and strategic growth for the nation’s startup ecosystem. According to the ‘India Venture Debt Report 2024’, released by Stride Ventures, this achievement heralds a period of unprecedented expansion and opportunity in the realm of venture debt financing.

The third edition of the report highlights a notable surge in cleantech deals, with stakeholders anticipating this sector to attract the most venture debt funding in 2024. This shift underscores a broader trend towards sustainable and environmentally conscious investments, aligning with global priorities and investor interests in green technologies.

India’s venture debt market has not only crossed the billion-dollar threshold but has also demonstrated remarkable growth amidst economic disruptions, reaching a record $1.2 billion in CY23—an impressive 50% increase from the previous year. This surge, comprising approximately 175-190 deals, reflects a robust Compound Annual Growth Rate (CAGR) of about 34% from 2017 to 2023, firmly establishing venture debt as a burgeoning asset class in India’s financial landscape.

Ishpreet Singh Gandhi, founder and managing partner of Stride Ventures, commented on the milestone, stating, “Venture debt in India, surpassing $1.2 billion in 2023, signals a shift towards strategic financing, propelling Indian innovation to global prominence. With the market poised to hit $1.8-2Bn by 2026, India’s future in the global startup scene looks not just promising but unstoppable.”

Insights from the report reveal an evolving landscape of venture debt usage among founders, venture capitalists, and investors. There is a growing preference for one-stop debt solutions that offer comprehensive financial packages, simplifying the capital-raising journey for startups.

Apoorva Sharma, managing partner of Stride Ventures, emphasized the swift expansion of India’s venture debt market, jumping from $800 million to $1.2 billion within a year. Sharma highlighted a seismic shift in investor confidence and strategic adoption, attributing the surge to thorough due diligence and the promise of resilience and returns inherent in the asset class. As both founders and VCs increasingly integrate venture debt to balance equity and growth, it becomes central to India’s funding landscape, signifying a pivotal evolution in the startup ecosystem.

This trend reflects the market’s maturity and the increasing sophistication of venture debt solutions tailored to the nuanced needs of fast-growing and globally-minded companies. India’s startup ecosystem, ranking third globally, secured $8 billion in VC investment in 2023, constituting about 3% of the global venture capital market. Despite challenges, India’s performance signals a critical evolution in investment trends and economic factors shaping the startup landscape. As the venture debt market continues to expand and evolve, it is poised to play a pivotal role in fueling innovation and driving economic growth in India’s dynamic entrepreneurial ecosystem.

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