The last couple of years have been rough for the startup ecosystem. At LetsVenture, while we knew there needs to be an integrated solution on fundraise (between equity and debt), we also knew that equity and debt are very different categories, with different evaluation criteria, and different team skillsets needed.
As a founder, I strongly believe that founders should be focusing on building the business, and meeting customers rather than solving for capital and fundraising from different players. Hence LV Debt.
The traction we have seen has surprised us. We have already disbursed Rs 10 Cr and are on track to go to 3X every month by June. This shows that in spite of all the players, this space still needs more transparency, and founders still need more help. However, while the business is seeing momentum, I see gaps in founders' understanding of how to plan ahead for debt so that it truly delivers the value it is supposed to create for the business. Rejections are still high at LV as we follow stringent criteria.
Key Insights:
1. Short runway: Businesses don’t have enough runway when they start looking for debt. Founders come to us when they have two to three months of runway. The ideal runway to have is eight to nine months.
If you accept in spite of a short runway, please know as a founder that debt is the riskiest instrument. Take debt when you don't have runway, or the confidence to build the business, and you could end up losing all the IP built. Default on Debt could end up eroding all the value built. That’s a finer nuance that gets missed out.
2. Lack of financial discipline: This shows up in bad CIBIL or delayed payments (even if you have been a day late in the past). It impacts your business profile and you will pay higher rates of interest. Get this metric monitored by your CFO on a continuous basis.
3. Over leverage on debt: You can’t pay off one debt with another debt and cycle the capital. This is bad planning and this will catch up sooner than you would like it to.
This is just the beginning of our understanding of how founders should think of debt. We will dive deeper and create playbooks that you could follow. Ideally use the playbook to hold your CFO/ finance team accountable.
If you are looking for someone to talk to for your debt needs, reach out to Pramod Lamba and Sabah Mehkeri. We are setting ourselves the target of reverting back with a yes or no within 48 hours. Our ticket size is Rs 30L to Rs 2cr, depending on the business revenue, with a preferred rate of interest for your founders.
We are sector agnostic, with financing that includes working capital, supply chain financing, asset financing, invoice discounting, and line of credit.
As always, we want to solve your problem the right way. Our vision of making fundraising easy remains intact, irrespective of the instrument.
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