Trifecta Capital closes $213-million third venture debt fund; dry powder now at $360 million

Gurugram-based Trifecta Capital has raised Rs 1,777 crore (approximately $213.5 million at current exchange rates) in the final close of its third venture debt fund, surpassing the initial target of Rs 1,500 crore.   

Limited Partners (LPs) in the third fund—Trifecta Venture Debt Fund-III—include existing investors as well as new investors including large global financial institutions, domestic conglomerates, banks, insurance companies, development financial institutions, public sector entities, and family offices.  

Trifecta said it plans to launch its fourth venture debt fund in early 2024.  

The fund has already invested Rs 1,500 crore in over 50 start-ups including Zepto, The Good Glamm Group, Cashfree Payments, Bira, Infra.Market, Udaan, and Blusmart.

Trifecta’s Co-founder and Managing Partner Rahul Khanna said the company can invest up to Rs 4,440 crore by making use of capital recycling provisions. The firm now holds a dry powder of approximately Rs 3,000 crore.

In a typical seven-year lifecycle of a venture debt fund, the draw and recycling period is till year five, while the fund returns capital on the principal in the last two years. To be sure, debt funds generate interest income all along its life which gets distributed on a quarterly basis. A fund’s recycle ratio is typically 1.8-2x during the investing period, which means a fund of $100 million could potentially do over $200 million of credit during its lifecycle by recycling capital.

"With Trifecta Venture Debt Fund III, we have a pipeline of near-term opportunities worth more than Rs 800 crore across a curated cohort of start-ups. We expect to cross Rs 6,000 crore of cumulative debt capital invested during the current financial year itself,” Khanna said.  

With the third fund's closure, Trifecta Capital has cumulatively raised nearly Rs 5,000 crore across its three venture debt funds and one growth equity fund. It has a portfolio of over 150 start-ups, including 21 unicorns. Big Basket, Pharmeasy, Cars24, Vedantu, ShareChat, Dailyhunt, UrbanCompany, CarDekho, Atomberg, NoBroker, Dehaat, and Livspace are among its investee firms.

Trifecta claims that 40 per cent of its portfolio companies have already secured follow-on equity financing since their initial investment from the third fund. The firm also asserts that the portfolio start-ups have achieved a median revenue growth rate of 60 per cent annually.

The fund said it will prioritise follow-on investments in well-capitalised companies and category leaders within the portfolio.  

The eight-year-old company’s first venture debt fund has returned almost 1.5X of its capital to investors and is expected to wind up the fund in 2024 after distributing additional capital gains, it claimed.