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SVB plans to partner with VC firms in India to lend to venture-backed local companies in the early and growth stages 

By Namitha Jagadeesh, Livemint.com

In a first for the Indian market, SVB Financial Group, has begun non-banking venture lending operations through its subsidiary SVB India Finance Pvt Ltd. Venture lending, which refers to financial institutions providing debt capital to VC-backed companies, is a new concept in India and currently not offered by other institutions.

SVB plans to partner with VC firms in India to lend to venture-backed local companies in the early and growth stages. The firm will be headed by managing director Ajay Hattangdi, and Ash Lilani, president, India and China, SVB Financial Group, will act as chief executive.

SVB, which focuses exclusively on banking venture capital firms and portfolio companies, opened its India office in 2004. In addition to its latest offering, SVB has a crossborder consulting arm SVB India Advisors Pvt Ltd and co-invests with other venture firms in Indian companies out of its $54 million fund SVB India Capital Partners.

So far, it has invested in a dozen companies including Bangalore-based construction company Geodesic Techniques Pvt Ltd and Gurgaon-based remote desktop assistance company iYogi Technical Services Pvt Ltd.

By Andrea Orr, The Latest from VC Ratings

Last week’s news that Facebook Inc. had borrowed $100 million from TriplePoint Capital sparked speculation that the social networking site had turned to lenders after being turned away by venture capitalists no longer willing to bet on the company’s sky-high valuation.

Not so, says TriplePoint CEO Jim Labe (pictured), who notes that TriplePoint had previously issued $200 million in debt to Facebook and has helped finance a range of companies, from Netflix Inc. [NFLX] to HotMail before it was acquired by Microsoft Corp. [MSFT] and YouTube before it was bought by Google Inc. [GOOG]. TriplePoint, which routinely advises companies of all levels of development but which specializes in early-stage funding, says it has recently seen an increase in demand for debt financing, particularly in the cleantech and energy sectors.

“Our pipeline is very very large and growing,” Labe says. “Definitely, demand for equity is more competitive than ever.

“Some material suggests we provide debt as a substitute for equity, but the debt we provide enhances the equity that these companies raise,” he adds. “Any company that just relies on equity is making a mistake.” 

While companies like Facebook may have no trouble raising venture funds, turning to debt for at least some of their capital requirements enables them to minimize dilution, says TriplePoint, which advises early-stage companies to build their capital by layering debt in with venture money. At the same time, TriplePoint says that the way it structures its loans, with warrants for very early-stage companies and fees in addition to standard interest, enables it to see returns upwards of 30%, with minimal risk since it can collect its fees and interest “even if there is never a liquidity event.”