Venture debt funding steadily expands in Indian fintech and EV startups: Report

The venture debt market in India is steadily expanding, similar to the early days of venture capital, especially in emerging sectors like fintech and electric vehicles (EVs), according to a report released on Thursday. Indian entrepreneurs are increasingly turning to venture debt to fill funding gaps and reduce equity dilution, as noted in a report by the global investment firm Lighthouse Canton.

This shift is primarily driven by limited equity funding available in the market and a desire to maintain ownership while accessing the necessary capital for growth.

The report indicates that the top reason founders prefer venture debt over traditional debt and equity is its non-dilutive nature (40 percent), with flexible repayment schedules being another significant factor (30 percent).

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This preference reflects a growing awareness of venture debt’s strategic advantages, particularly in capital-intensive and rapidly evolving industries. “India’s startup ecosystem holds immense potential, and the growth of venture debt funding is playing a pivotal role in driving its development,” said Sanket Sinha, Managing Director and Global Head of Asset Management at Lighthouse Canton.

“We believe this mode of funding will be essential in fostering innovation and empowering startups, ultimately supporting sustainable growth across the nation’s dynamic business landscape,” he added.

According to the report, approximately 67 percent of EV startups rely on venture debt for more than half of their debt funding. “With traditional lenders like banks often viewing the EV sector as high-risk, venture debt serves as a vital alternative,” the report noted.

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