Welcome to our ‘Fund in Focus’ series where we profile our member funds, underscore their investment philosophy, and highlight some of their interesting work. Today we speak to Apoorva Sharma , Managing Partner at Strides Ventures - India's most active Venture Debt fund. She shares insights on their guiding principles, transformative impact on start-ups, and sectoral growth predictions. Explore their unique risk assessment, adaptive strategies, and the role of technology in financial inclusion. Discover emerging industry trends, the team's banking expertise, and the holistic support provided beyond capital. Gain valuable perspectives on exit strategies, global ambitions, and success stories, showcasing Stride Ventures' pivotal role in shaping India's start up ecosystem.
FUND IN FOCUS: Seizing the ‘India Opportunity', Stride Ventures Sees Growth in EV, Fintech, and Consumer Sectors
1.What guiding principles underpin Stride Ventures' venture debt investments, especially in growth-stage companies?
Stride Ventures is the most active Venture Debt fund in India. The company offers customized and founder-friendly debt solutions to new age businesses empowering them to allocate capital strategically. We have pioneered innovative alternative solutions to cater to the unique needs of startups and growth-stage businesses. Venture Debt provides startups with an alternative financing option to fuel their growth without diluting equity.
Stride's has transformed the financing landscape for startups in India, offering them working capital, capex, acquisition financing through the fund business and custom-made supply chain financing solutions through Stride One.
Impact: By providing venture debt under the entrepreneur-first approach, we secure the interest of the Founder and help startups bridge their funding gaps, extend their runway, and accelerate their growth. This has had a transformative impact on their ability to scale, attract further investments, and achieve key milestones. Stride Ventures has (~30%) one of the largest market shares in the sector, which is an indication of how successful it has been in identifying a financing gap and penetrating the startup ecosystem. The fund boasts a well-diversified portfolio of 120+ companies across various sectors. It has demonstrated industry-leading returns with best-in-class asset quality and a portfolio of market leaders like SUGAR Cosmetics, The Good Glamm Group, Mensa Brands, Exotel, MoneyView, VideoVerse, BluSmart, Lohum, Miko, Perfios, HealthifyMe, Ace Turtle and Waycool to name a few.
2.As a VD fund, what's your take on the ‘India Opportunity’? Which sectors according to you will be significant growth drivers for the Indian economy?
Global value chains (GVCs) are currently undergoing significant changes, influenced by three major trends predating the pandemic: the rise of new technologies, the urgent need for environmental sustainability in response to climate change, and the evolving nature of globalization. The COVID-19 pandemic has further accelerated these shifts. In response, international companies are revising their manufacturing, supply chain, and investment strategies to enhance resilience, opening doors for new regions to become preferred locations.
India stands as a strong contender to seize this opportunity. The country's advantages include the potential for substantial domestic demand, proactive government policies promoting manufacturing, and a unique demographic advantage. Furthermore, India is actively encouraging all sectors to generate employment for its rapidly expanding workforce, aiming to distribute economic growth more evenly and manage its trade deficit more effectively. There is a visible excitement around ESG focused ventures across the board in categories such as EV, clean-tech etc. We are witnessing startups aimed at balancing profitability and sustainability in their business models.
India is one of the fastest growing fintech markets globally. India has a set of open APIs through the India stack including eKYC, Adhaar, Digi Locker and UPI. This makes it easier to build businesses on top of the digital architecture.
Stride is poised to be the largest EV financing institution for Indian startups. This will further drive India's EV sector towards its 2030 goal of 16-17 million sales. We provide tailored financial solutions to startups, aiding scalability and easing capital acquisition. Our strategies, emphasizing efficient and founder-friendly financing, facilitate innovation, sustainable growth and equity protection. Examples like BluSmart in our portfolio highlight our role in enabling startups to compete effectively in challenging EV market segments.
The consumer sector has been one of the prime focus areas for Stride. India has seen increased consumerism with many domestic brands coming up across BPC, Apparel, Food and Beverages etc. Stride boasts 35+ category leaders in its portfolio across different consumer sectors
3. How does your fund approach risk assessment in this unique investment space?
Venture debt is a loan to new-age businesses. We back category leaders that have fundamentally strong business models and are well-capitalized with backing from marquee institutional investors. We stay away from sectors that have regulatory overhang like crypto, real money gaming etc.
Mostly, Venture debt investing starts after a company at an early stage has raised over $5 million from venture capital and when the company generates Rs 2-3 crore per month in revenues. These companies have less leverage with the standard being less than 5% of valuation. They should also have a runway of over 9-12 months at the time of our investment.
We also keep our investors in view while developing investment strategies. Venture debt yields recurrent, tangible, and foreseeable returns, akin to fixed-income investments. Thus, various classes of investors, including domestic investment offices, family treasuries, and analogous entities, have been showing great enthusiasm.
4. How does Stride Ventures stay agile and adapt to market trends and shifts in the venture debt landscape?
We keep active track of the market and adopt an entrepreneur-first approach and an institutional framework towards funding and financing solutions. What that means is we deliver solutions which protect against equity erosion and tap into use-case scenarios of debt/credit solutions to enhance scalability and stability.
As pioneers of debt/credit solutions in India we are actively increasing the opportunity size by educating startup founders and last-mile entrepreneurs who are a vital part of the value chain. Stride is also reimagining banking solutions for the last-mile entrepreneurs, vendors, farmers and suppliers of Indian startups and MSMEs with StrideOne.
Aligned with his larger mission of fueling India's entrepreneurial promise through financial inclusion, we found that the answer to this barrier to access to finance for MSMEs lies in technology. In 2022, we launched StrideOne, a tech-led financial services platform for MSMEs and startup supply chains to drive financial inclusion for both. StrideOne will allow supply chain partners of startups like MSME entrepreneurs to grow alongside the upcoming unicorns of India. A more comprehensive opportunity size can be analysed from the StrideOne report ‘The Startup Economy Report 2022’.
We seek collaborative opportunities with the public policy and government stakeholders of our country. The support of the macro policy becomes essential to scale innovative business models like the need for public infrastructure to support the amplification of EV adoption across all formats and business categories.
5. What are the emerging trends in the industry that you foresee influencing your future investments?
Entrepreneurs are looking for protection against equity erosion and maintaining scalability through Stride Ventures funding solutions and new-age financing solutions under an institutional framework to help build resilient business models.
In 2022, venture debt worth $800 million was deployed in India, and it is anticipated that this figure may increase to $3-5 billion within the next five years. Venture debt disbursals in India rose 49% year-on-year in 2022. The Indian venture ecosystem has significant growth ahead of it this decade, and venture debt will play a vital role in enabling this growth. A more comprehensive opportunity size can be analysed from the Stride Ventures ‘The India Venture Debt Report 2023’.
StrideOne perspective- According to the World Bank appraisal document for the Raising and Accelerating MSME Performance (RAMP) programme, over 40% of MSMEs lack access to formal sources of finance. As a result of the lack of proper accounting systems, updated financials, and proper documentation, a large number of MSME borrowers are excluded from the traditional lending ecosystem. For India to step confidently into the future, servicing the credit needs of India's 60 million MSMEs without any access to formal credit is paramount. The meteoric rise of startups also showcases the immense potential for Indian MSMEs to grow alongside these new-age businesses. Today, India is the 3rd largest startup ecosystem in the world, this has significantly impacted the Indian economy and showcases the ability to contribute approximately 4-5% to the GDP of India.
6. With your team's banking experience, how do you leverage this unique perspective in evaluating potential investments and assisting portfolio companies?
We are the most active venture debt fund in India. This is achieved by leveraging the Stride team's cumulative team experience exceeding 100 years.
Stride Ventures, the firm has become the most active lender in the Indian startup ecosystem. The venture debt firm boasts a well-diversified sector-agnostic portfolio of 120+ companies, sanctioning over 4000 cr. The team has consecutively received prestigious awards like ‘Venture Debt Fund Of The Year’ for its role in introducing and pioneering alternative funding in India.
Our in-house technology team is innovating tech-enabled underwriting and full-stack customised solutions for not just funding but financial solutions that become part of the business model/operations.
The institutional framework at Stride supports all financial functions of both budding and unicorn businesses. We are the most reliable allies for entrepreneurs. We work closely with teams to build solutions bespoke to their needs, and now together with StrideOne, we are supporting both funding and financing needs. This approach makes us a partner of the entrepreneurs, helping them build and scale their businesses without equity erosion. This is made possible by the team's collective strengths to enable the required pace of execution and innovation.
7. In what ways does Stride Ventures provide support and value beyond capital to its portfolio companies? Can you share any specific instances of this?
Support and enable public and private partnerships, this empowers our portfolio companies to scale in unison alongside the required public infrastructure.
We also enable collaborations among our portfolios to support ecosystem synergies. We help them synergize and use each other's services.
We are also giving wings to the global ambitions of Indian entrepreneurs by supporting them with funding, global networking, and collaboration opportunities. We took some of our best companies to Abu Dhabi in Feb 2023 and got them to meet the sovereign funds in that region to give them access to global capital.
Stride One is a unique platform that allows financing to the ecosystem of the start up in addition to balance sheet debt through Stride Ventures. This enables the start-up’s distributors, retailers, and vendors to access credit.
We help our portfolio companies get bank debt at the best possible rates to reduce the blended cost of financing for them.
8. What exit strategies does Stride Ventures typically consider when partnering with portfolio companies? Can you share a notable success story related to this?
In venture debt, the debentures are self-liquidating, so we get the money back as per the repayment schedules. In warrant positions, we actively manage exits on a quarterly basis. We have exited one of the highest warrant positions in the industry, which shows the focus we have to generate tangible and good returns from capital gains. We have exited warrants in companies like Bizongo, Aknamed, ProgCap and Sugar and made a good upside.