Trifecta Capital announces first close of late-stage fund at Rs 1,000 Cr, aims high for the road ahead

Founded in 2015 by Rahul Khanna and Nilesh Kothari, Trifecta Capital is a pure-play venture debt fund that backs several prominent startups such as PharmEasy, Bigbasket, Vedantu, etc. The firm recently announced the first close of its late-stage fund at Rs 1,000 crore.

Rahul Khanna, Co-founder and Managing Partner, Trifecta Capital says that the fund has a great set of existing investors and an attractive strategy, making it easier for them to raise funds. Owing to the pandemic and the restrictions, most of the work was done virtually and the platform managed to raise Rs 1,000 crore in three months.

“The real work begins now; so excited to start investing this capital into some very high-quality opportunities,” says Rahul.

Rahul shares that Trifecta Capital has got a lot of support from financial institutions in the past, therefore, the subsequent closing would include additional financial investors such as banks, insurance companies, and a healthy mix of offshore investors.

They have also been building new partnerships with capital providers based outside of India, who are expected to make an entry into the country’s startup ecosystem in the next couple of months. The platform is trying to close the fund in the next six months.

“Often, raising capital in India is hard but what we found is that once you have some track record and some performance, it’s easy to get capital from investors,” says Rahul.

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He adds that the fund is mainly targeting late-stage companies that are one to three years away from a liquidity event like an IPO or a strategic sale. The transaction size would be around Rs 100-200 crore per company.

“We have a great pipeline of opportunities because we’ve been working with many companies through our venture debt funds,” he says. The fund has supported around 75 companies over the last five years with venture debt, and many of those companies would be natural candidates for the fund to invest in.

He shares that as long as the companies can dial up or dial down their burn, and are making investments leading to substantial growth, the profitability angle can be pushed down. “As long as some of the levers of margin and profitability are in the company’s control, it’s something we can get comfortable about,” he says.

According to Rahul, valuations are a function of demand and supply. There is a lot of supply of capital, which is why companies can command a significant premium.

“You can either buy good or you can buy cheap, and our preference would be to buy good companies,” he says. They intend to back either the category leaders or key challengers as these are the kind of companies that would be around for a long time.

He concludes by saying that there has been a shift from the idea of public goods to private offerings. Media, banking, and insurance were all public goods and today, these industries have been transformed with capital and technology. Industries like healthcare, transport, food, and energy are all public goods today, but in ten years, these sectors will be transformed drastically.

“We are very excited about how technology and capital can transform some of these sectors that are right for disruption,” says Rahul.