Will do 30 deals this year: Murali of InnoVen Capital India

Early this year, sovereign wealth fund Temasek Holdings bought Silicon Valley Bank India Finance (renamed InnoVen Capital India) to take a plunge into the growing venture debt market in India. In a conversation with Business Today's Manu Kaushik, the company's managing director Vinod Murali speaks about the opportunities that lie ahead for the company in the Indian market.

Q. InnoVen is the oldest venture debt company in the country. You have seen the market more closely than anyone else. Tell us about your experience.

A. We started in 2008. Our first deal was Prizm Payment, a company which was acquired by Hitachi. We have done almost 80 transactions across 55 companies. Venture debt is a derivative of venture capital. You need a stable venture capital ecosystem for this asset class to survive.

We started around the same time when venture capital took off in India. It meant that a lot of our learning has been along the way. In India, our focus area is digital media, clean tech, financial services, technology, consumer and healthcare.

Q. What was the motivation behind this firm?

A. When we started-both Ajay [Hattangdi] and I-the intention was to do something entrepreneurial. We are lenders. I was in Citibank before this and ICICI Bank before that. It was completely new in India so there was a factor of the unknown. It was about using what we knew in an arena which was looking very interesting.

When we started, it was a pioneering effort. Venture capital itself was reasonably new and venture debt was unheard of.

The first two to three years were difficult. One of the difficulties was getting the word around. This product relies heavily on venture capital sustainability.

Typically, we have a tenor of 2-3 years. I have a little bit of equity upside. The equity upside is longer in tenor. We give loan facility to a company and that's paid back over 24-36 months timeframe. If a company has very strong exit event either through acquisition or through listing, then we tend to benefit a little from that. We don't get equity, it's an option. We structure [our lending] in a way that if a company is successful; the equity component pays for the gap in the overall portfolio.

Recently, when we had three exits - Myntra, Freecharge, Prizm Payment (our portfolio companies) - the options came good for us. In 2014/15, we did 20 transactions. We will do 30 deals this year.

We have recently been acquired by Temasek . The intention is to take this platform to Asia starting from Singapore. Singapore has a growing ecosystem for entrepreneurship.

We have a team of seven people. We should be 10 people through the year. We have networks with all active VC funds.

Q. How does venture debt help start-ups?

A. We help companies extend their runway between the [equity funding] rounds. We provide financing only to venture-backed companies at the moment. Recently, in the case of Practo, we funded along with round raised by other venture funds. In many cases, we fund right after an equity round.