DBS launches venture debt programme for tech startups

DBS has launched a venture debt programme for tech startups amid what it says is growing demand for such financing in Singapore.

This provides such companies that are still at a growth stage in their business life cycles another funding source, besides venture capital that startups mainly rely on currently.

Startups will be able to use DBS venture debt for working capital, acquisitions of fixed assets and project financing.

To qualify, such firms will have to be backed by the banks' partner venture capitalists such as Vertex Venture, Monk's Hill Ventures and Golden Gate Ventures. They also have to have raised at least S$1 million of Series A funding, have operated for at least a year and been incorporated for at least two years, and demonstrate a commercially viable business model.

Said DBS head of SME Banking, Lim Chu Chong: "Tech start-ups can use venture debt to complement venture capital, and buy more time and flexibility for their businesses to hit key development milestones, which can potentially increase their company valuations. We hope this will be a boost to the start-up eco-system in Singapore and help innovative tech companies scale up and reach profitability at a faster pace."

Singapore ranks as the top market for startups in South-east Asia, according to the Singapore Venture Capital and Private Equity Association.

Venture capital deals worth US$454 million were recorded in Singapore last year, compared with US$918 million across the rest of South-east Asia.

The country also ranks ahead of Japan, South Korea and Hong Kong in attracting venture capital. Local tech firms pulled in funds amounting to US$1.71 billion in 2013, although this pales in comparison with China's US$3.46 billion, according to Asian Venture Capital Journal.

Funding for Singapore's tech firms has also grown exponentially in recent years, from US$27.7 million, or 0.3 per cent of funding in Asia, to the current 19 per cent.