Venture debt marketplace 8vdx to offer cross-border loans to startups
The company aims to offer cross-border venture debt to startups through local entities in the new geographies.
“Startups are having trouble raising funding in the present economic climate due to the funding winter. This move will play a critical role in delivering founder-friendly finance,” founder Ravi Chachra told Moneycontrol.
Startups can easily obtain venture loans through an intuitive interface and choose to repay in their local currency including the British pound, the Singapore dollar and the Australian dollar, Chachra said.
To begin with, 8vdx plans to disburse around $1 million in cross-border venture debt to high-growth early-stage startups to bridge their Series A or Series B round of funding.
Founded in 2021 by Chachra and Vijay Lavhale, 8vdx was part of Y-Combinator's winter 2022 batch. Y-Combinator is Silicon Valley's prominent incubator and startup fund.
To offer debt in founder-friendly terms, 8vdX has the option of turning the debt into equity in case a startup is unable to pay the loan or continues to be a lender, therefore it does not seek personal guarantees from the founders or force startups to file for bankruptcy.
“We aim to offer cross-border venture debt solution to the startups in these countries so that the founders can spend more time on their businesses and less time on chasing small ticket investors. Startups do not require the flip process in order to raise cash,” Chachra said.
8vdX chooses startups for underwriting and funding approval using data-driven underwriting techniques that are driven by their KPIs' and growth metrics.
It has funded more than 20 early-stage startups, including three from India and four from Africa, since its inception, the company said.
The lender claims to have assets under management of US $10 million and is growing at the rate of 25 percent per week.
“By 2024, 8vdx aims to fund 100 startups in these countries with an AUM of $200 million…we invested in 21 companies but already signed up 3 companies through this cross-border financing,” Chachra said.
Lavhale said there are some regulatory barriers to offering cross-border debt like lending regulations, licensing issues, forex-related rules, which differ from country to country.
“Offshore debt is complicated, you need dedicated experts to handle this. The government and Reserve Bank of India (RBI) recently came up with this framework of lending to startups offshore through convertible notes…so we need experts and experience to know the nuances,” he said.
The lender recently launched a $75 million fund through which the cross-border debt will be offered, Chachra said.
8vdx in May raised $3 million in a seed round from Y Combinator along with GMO Venture Partners, Zillionize, Cathexis, Grant Park, Asymmetry Ventures, Earlsfield Capital Partners and Fox Ventures