India's venture debt market booms to $1.23 billion, outpacing venture capital growth

India’s venture debt market has been expanding at a compound annual growth rate (CAGR) of 58% between 2018 and 2024, reaching $1.23 billion last year. According to the latest Global Venture Debt Report 2025 by Stride Ventures in collaboration with Kearney, this growth trajectory has positioned India as a frontrunner in venture debt adoption among startups.

Venture debt outpaces VC Growth

As venture ecosystems evolve globally, venture debt is gaining prominence as a viable financing option, allowing startups to secure essential growth capital while maintaining equity ownership.

“Venture debt across the world is growing at a 14% CAGR, advancing from being a niche instrument to a mainstream asset class, empowering entrepreneurs to grow sustainably,” said Ishpreet Singh Gandhi, Founder & Managing Partner, Stride Ventures.

India is a key driver of this shift. The venture capital (VC) market in India rebounded in 2024, recording a 20% year-on-year increase to reach $12 billion. However, the venture debt segment has outperformed this growth, with deal count rising by 30% year-on-year to 238 transactions. This reflects a shift in how startups are approaching their capital requirements, increasingly favouring debt as a complement to equity financing.

“India has emerged as a frontrunner in venture debt adoption by startups, driven by a combination of macroeconomic shifts, evolving founder preferences, and greater institutional participation,” said Apoorva Sharma, Managing Partner, Stride Ventures. “As equity capital becomes more selective, venture debt is playing a pivotal role in bridging funding gaps while empowering founders to retain strategic control.”

Sectoral hotspots driving growth

Fintech, consumer tech, and cleantech emerged as the top three sectors by deal value in 2024. Fintech led the space with $445 million across 49 deals, followed by consumer tech at $294 million across 81 deals. Cleantech, a rapidly growing sector, secured $202 million across 22 deals.

Key transactions included Bluestone ($61 million in Series G), Infra.Market ($42 million in Series D), Ather Energy ($47 million in Series E), and Money View ($39 million in Series E), according to the report.

“Venture debt’s rise in India reflects a maturing startup ecosystem where capital efficiency is critical. Its growing adoption by LPs and VCs not only underscores a deeper financial sophistication but also highlights untapped potential in markets for this asset class,” said Manish Mathur, Senior Partner, Kearney.

Mathur also noted that while venture debt was once primarily a tool for runway extension, it is now driving pre-IPO readiness and strategic scaling, offering founders a way to preserve equity while fuelling growth.

Changing Perceptions

Historically, venture debt was seen as a secondary financing tool for most startups, but it is now being widely adopted for multiple use cases. The report highlights that 52% of venture debt funds are used for working capital, followed by growth financing and runway extension at 44% each. Additionally, 41% of founders now see venture debt as a tool for pre-IPO bridge financing, while 37% use it for inventory and capital expenditure (CAPEX) financing.

The venture debt market is now perceived as neutral to mature, with 39% of stakeholders predicting continued significant growth.

Investor and founder sentiment further validates this shift. Around 70% of Indian founders plan to raise venture debt in the next 24 months, while 77% of founders and 85% of investors expect moderate to significant market growth. However, despite this increased interest, some founders still hesitate, perceiving debt repayment as a burden compared to equity financing.

“Despite its rapid growth, venture debt remains underutilised in many markets, presenting significant opportunities for further development. The next phase of venture debt growth will be defined by how effectively ecosystems across the world embrace and integrate it as a mainstream funding instrument,” said Sebastian Drescher, Partner, Kearney.

Regulatory boost

Government policies are also playing a role in fostering the venture debt ecosystem. The Finance Minister’s 2025 announcement of a ₹20,000 crore ($2.4 billion) fund for deep-tech startups is expected to increase venture debt viability in capital-intensive sectors. Additionally, the abolition of the angel tax, effective April 2025, is set to boost investor confidence and accelerate debt adoption.

Even Gujarat International Finance Tec-City (GIFT City) has played a crucial role in attracting global investors. By 2024, it was home to over 700 entities, including 31 banks, more than 80 capital market intermediaries, 37 insurance and reinsurance firms, 55 fintech companies, and over 140 alternative investment funds (AIFs).

With this regulatory push, limited partners (LPs) are increasingly treating venture debt as a mainstream asset class, with 54% of Indian LPs acknowledging it as critical for balanced capital allocation. Compared to their global counterparts, Indian LPs favour hybrid structures that align with their risk-return expectations. Similarly, venture capitalists (VCs) are endorsing debt as a means to extend runway, preserve ownership, and optimise capital efficiency.

Geographical Trends

Bengaluru continues to be India’s venture debt hub, accounting for 40% of total transactions in 2024, followed by Delhi NCR and Mumbai.

On the global front, Southeast Asia (SEA), Europe, and the GCC (Gulf Cooperation Council) are witnessing rapid expansion in private credit and venture debt markets.

In SEA, private credit has shown resilience despite economic headwinds, with the venture debt market projected to surpass $3 billion. Europe’s growth debt sector recorded a 21% CAGR between 2018 and 2023, increasing its share of the venture capital market from 16% to 30%.

“Europe is emerging in terms of its adoption of venture debt as a percentage of venture capital. It is second only to the US, and over time, as greater consolidation occurs and more players enter the region, we expect unparalleled opportunities,” said Ravneet Mann, Partner (UK), Stride Ventures.

Meanwhile, the GCC’s venture debt market has expanded 13x from 2018 to 2024, with UAE-based startups leading in deal volume. The region has seen a surge in foreign capital, regulatory advancements, and economic diversification in the UAE and Saudi Arabia.

“The region has seen a massive influx of foreign capital. Previously, it was predominantly domestic, but now foreign investors are entering the space. Venture debt and growth debt are relatively new here, with prominent US-based players dominating the field,” explained Fariha Ansari Javed, Partner (GCC), Stride Ventures.

She added that much of the venture and growth debt in the region has been allocated to companies with a clear path to IPO or exit—unlike in mature markets. “The GCC market is probably about five or six years behind India, but it has a steep growth curve, so we expect a huge surge in this region,” she noted.

As global venture debt funds enter India, competition is expected to intensify, leading to more founder-friendly deal structures. The next phase of growth will be defined by how effectively ecosystems across the world integrate venture debt as a mainstream funding instrument.

“The real question is no longer about its growth but how quickly it becomes a mainstream funding instrument worldwide,” Mathur added.