Venture debt funding differs from conventional venture funding, as it is a debt form. It is usually raised by firms already backed by VC investors and typically involves an equity convertible portion, which kicks-in in the event of an acquisition or the firm going public. It is more common in the technology field where startups face problems of lien in approaching commercial banks for debt finance either for working capital or expansion.
Bijaei Jayaraj, founder and CEO, Loylty Rewardz, did not comment on the convertible portion of the deal, but confirmed the transaction to Techcircle.in.
"We opted for debt funding instead of equity funding because it's cheaper (than equity). We will primarily invest the funds in ramping up our technology and increasing the team size," said Jayaraj.
The company currently employs 123 people, which it plans to increase to 170 in the next 6-9 months.
The Mumbai-based company was founded by Jayaraj in 2006. It offers solutions for consumer loyalty and relationship management needs, whether it's financial, retail, hospitality, online or travel. It incentivises consumers for their card transactions in the form of points, which can be later redeemed via various goods and services like mobile recharge, movie tickets, air tickets, merchandise, etc.
The company claims to be the largest loyalty programme management firm in the country and it currently manages loyalty programmes for around 170 million debit/credit cardholders in India. Jayaraj puts the total number of cardholders in the country to around 290 million, and adds that in another three months, the company will manage loyalty programmes for 200 million card holders.
On an average, the company processes around 11 million transactions on a monthly basis, which are worth around Rs 1,700 crore.
Loylty Rewardz's clientele mostly includes banks like State Bank Group, Punjab National Bank, Bank of India, Central Bank of India, Citibank, HDFC Bank and Federal Bank.
In November 2009, the company had raised Rs 6 crore from three investment firms including eYantra Industries Ltd, Ventureast Proactive and Argonaut Private Equity, of which Rs 2.4 crore came from eYantra. Post that, the company raised $4.4 million in its Series B round of venture capital funding from Canaan Partners in October 2011.
In the loyalty and rewards space, Bangalore-based QwikCilver Solutions Pvt Ltd had received an undisclosed amount of funding from Helion Ventures and Accel Partners in the 2008. Another player in the space is Payback.
(Edited by Prem Udayabhanu)