Now joining the growing list of startups, seeking venture debt financing to meet their enormous working capital requirements is home decor platform Urban Ladder. The company has managed to scoop up $3 million in venture debt from the fledging venture debt specialist in India — Trifecta Capital.
Urban Ladder is the latest addition to the growing list of startups who’re venture backed, but are now finding it extremely difficult to raise substantial amount of funds. According to documents filed with the Registrar of Companies, the debt has been secured in multiple tranches, with the latest addition being in June. The cash has been provided against the issuance of non-convertible debentures and compulsorily convertible preference shares.
For those unfamiliar with the aforementioned terms,
- compulsorily convertible preference shares are those which need to be converted into ordinary shares of stock after a predetermined date.
- non-convertible debentures, on the other hand, are unsecured bonds that cannot be converted into stock or equity, but have a higher rate of interest.
Prior to this, the company has managed to raise about $77 million, including a $50 million round in April 2015. The investors in the home decor business includes TR Capital, Sequoia Capital, Steadview Capital, SAIF Partners and Kalaari Capital. It goes head to head with the immensely popular PepperFry, another online furniture business.
And if you look at all open options, this is a more preferable alternative for growth-stage startups who’re not looking to further dilute their equity. Though high-risk with a deadline for repayment, debt is the only remaining option for them. This venture debt gives the home decor platform a runway for about three to four months, says an anonymous source close to the development.
It will give the company an additional runway of three to four months. Now, will that additional runway of four months help the company grow the business by an additional 30%? If that additional growth helps improve your valuation and avoid dilution of stake, that is a good enough value you have generated.
the source adds.
Of late, numerous early-stage as well as growth-stage startups have been opting for venture debt instead of a seed or series round of financing. This cash gives the companies some headway to streamline their business, make progress, and then get back in the market for another fund raise. Recent venture debt financing would include the likes of Voonik, who also secured $3 million from InnoVen Capital and Lendingkart which in addition to a fund raise secured a whopping $12 million in debt for its digital lending platform.
