Skip to main content

Citigroup launches "venture lending" service in India

This week, Citigroup announced the first customer - Chennai-based Secova eServices - for its new "venture lending" service to Venture Capital-backed companies in India. Apart from providing a term loan, as part the Venture Lending transaction, Citigroup will also acquire a small pledge of stock warrants which would entitle it to invest and acquire equity shares in the customer company at a predetermined price.

The service is aimed at early- and growth-stage companies which have already raised a round of VC funding. Secova, for instance, raised its first round financing from the Tamil Nadu IT Fund (managed by IL&FS VC). By using debt financing from the Venture Lending service to finance fixed-asset purchases or working capital, entrepreneurs can employ their VC funding in areas such as accelerating product development or in making key hires. This way, entrepreneurs can achieve a better valuation for their companies before going in for the next round of equity dilution.

More from Citigroup's note about the service:

What is Venture Lending
Startup companies typically receive several rounds of equity investment prior to going public or being acquired. Each round is expected to provide sufficient capital to achieve predefined milestones. By reaching milestones, the company is able to (and typically needs to) raise a subsequent round of financing. These step-up rounds of financing serve two purposes: First, they enable entrepreneurs to minimize the amount of equity that is given up in the firm by linking further dilution with higher valuations. Second, they enable the venture capital investor to minimize investment risk by spreading the capital requirement over multiple rounds and usually a number of different investors.

There is a clear need for some amount of debt financing between VC rounds to help companies and investors ‘extend the cash runway’ of their investments. By using debt, the entrepreneur is able to have access to more capital without giving up as much equity. Put differently, venture debt enables the entrepreneur to run the company for a longer amount of time, increasing the enterprise value of the company, before raising more money. Venture Debt is an existing concept in the US accounting for over 25 years.

Benefits of Venture Lending
• Extends the “cash flow runway” for the company and makes it easier to achieve the next valuation milestone.
• Venture lending represents a less dilutive type of financing than venture capital financing since venture lenders generally require less of an ownership position.

Venture debt is typically useful for early stage and emerging venture-backed companies that are looking to build out their business through infrastructure expansion or growth capital. Venture debt is traditionally used for the purchase of hardware and infrastructure equipment, enabling emerging companies to reserve the venture capital investments for business critical activities such as research and development, marketing practices, and hiring. Additionally, venture debt can be used to finance accounts receivables, inventory, demonstration equipment and can be purely offered as growth capital.

For further details, contact Ajay Hattangdi, Vice President-Citigroup, Mumbai at ajay.hattangdi@citigroup.com or +91 22 5001 5039.

Popular posts from this blog

VC Interview: Shailendra Singh of Sequoia Capital India

In a recent interview to Venture Intelligence, Shailendra Singh discussed some of the firm’s newer investments in the early stage segment including in the online payments space, the progress at a few existing portfolio companies and the active role the firm is playing in helping its portfolio companies scale and succeed in India and globally. Prior to joining the firm in 2006, Singh was a strategy consultant at Bain & Company in New York and before that, an entrepreneur in the digital media industry. Venture Intelligence: How does Sequoia go about identifying potential early stage investments in India? Is there anything different you are doing today than, say, a couple of years back? Shailendra Singh: There is a lot more focus on technology investing and early stage investing. In general, as you might remember a few years ago, we were doing primarily growth investing but in the past 18-odd months, we have had a very strong focus on early stage and that’s continuing. In terms

ChrysCapital, Motilal Oswal PE & Sequoia named PE-VC Firms of the Decade

Press Release ChrysCapital, Motilal Oswal Private Equity and Sequoia Capital India have been named the top Private Equity & Venture Capital investors in India during the last decade, as part of Venture Intelligence’s APEX Awards. The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer.  While ChrysCapital won the “Private Equity Investor of the Decade” award, Motilal Oswal Private Equity was feted as India’s “Growth Capital Investor of the Decade”. The Indian arm of the storied Silicon Valley VC firm, Sequoia Capital, was named the country’s “Venture Capital Investor of the Decade”. The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms as well as "crowd sourced" nominations and voting from the Limited Partner, PE-VC and advisory communities. (The main criteria were Exit Track Record, New Fund Raises & Fo

Ambit tops League Table for Transaction Advisors to Private Equity deals in 2019

Ambit Corporate Finance topped the Venture Intelligence League Table for Transaction Advisor to Private Equity Transactions for the year 2019. Ambit advised PE deals worth $2.4 Billion (across 4 qualifying transactions) during the period. Citi ($1.1 Billion across 2 deals) and  Avendus  ($969 million across 12 deals) took the second and third spot. Edelweiss Financial Services ($758 million across 9 deals) and  PwC  ($708 million across 15 deals) completed the top five in 2019.  The  Venture Intelligence League Tables , the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Financial and Legal Advisory firms. Ambit Corporate Finance advised the $1.9 Billion buyout of Pipeline Infrastructure from Reliance Industries   by Brookfield Asset Management  and the IFC and I Squared Capital-backed   Cube Highways' acquisition of Delhi-Agra Toll Road from Reliance Infrastructu

Inventus, Sixth Sense, Blume & Norwest win Apex'20 Venture Capital Awards

Inventus Capital Partners, Sixth Sense Ventures, Blume Ventures and Norwest Venture Partners were voted the top Venture Capital investors in India during 2019. The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. Other 2019 winners in the VC segment included  Axilor Ventures which was voted   the  Accelerator of the Year for the second year running, 3one4 Capital (VC Fund Raise of the Year) and Innoven Capital (Venture Debt firm of the Year). The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms as well as "crowd sourced" nominations and voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Exit Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies).    " It is an honour to be recognised by entrepreneurs and investors as

PE-VC investments in 2020 cross $39-B to create a "hat trick" of all time highs

Press Release:  Private Equity - Venture Capital (PE-VC) firms, shrugged off the pandemic induced blues, to invest a record $39.2 Billion in Indian companies (across 814 deals) in 2020,  shows data from  Venture Intelligence  - a research service focused on private company financials, transactions, and their valuations. The $17.3 Billion* invested by US-headquartered private equity and other global sovereign wealth funds in Reliance Industries Limited (RIL) Group firms - including in the telecom-focused holding company  Jio Platforms ($9.9 Billion), Reliance Retail ($6.4 Billion), and  Reliance Digital Fibre Infrastructure Trust ($1 Billion) - accounted for 44% of the total PE-VC investment value in 2020. (*This figure excludes the $10.2 Billion in strategic investments by Silicon Valley tech giants Google and Facebook in Jio Platforms). On the back of the RIL deals, PE-VC investments in 2020 grew 6.6% over the   $36.3 Billion (across 1012 deals) invested in 2019 and helped create a