US firm Capria invests in Singapore venture debt outfit Genesis

Singapore

US-based global impact investment firm Capria Ventures has invested in Genesis Alternative Ventures Fund 1, a Singapore-based private venture debt fund, as a springboard into South-east Asia (SEA).

This is Capria's first investment in in the region, where it sees plenty of opportunities to make an impact on societies through its investments.

Capria specialises in investing in private funds and companies in under-invested emerging markets. Companies with meaningful impact objectives that are on its radar include those in financial services, healthcare, education, food production and logistics as they scale across S-E Asia.

"The idea of investing for superior financial returns coupled with sustainable impact is catching on in SEA and Capria is proud to partner with Genesis to further this wave," said David Richards, Capria's Seattle-based co-founder and managing partner, in an interview with The Business Times.

Mr Richards said with the Covid-19 pandemic, many such rapidly growing companies have emerged in countries such as Indonesia, Vietnam and the Philippines.

"They are increasingly looking at (the) most efficient ways to raise capital," Mr Richards said. "For example, India has been exploding over the last five years with venture debt. Ten years ago, it was almost zero. Now it is a very significant part of the venture financing ecosystem."

"We see the same thing starting to happen in SEA which is a couple of years behind but fast catching up as entrepreneurs start seeing the benefits of having different growth financing tools they can draw from."

Venture debt is often preferred by start-ups that do not want further dilution in a business that is already fast growing. It cuts the average cost of the capital to fund operations when a company is scaling quickly or burning cash. At the same time, it provides flexibility as it can be used as a cash cushion against operational glitches, hiccups in fundraising and unforeseen capital needs.

When Capria first started its own venture firm, Unitus Ventures, in India, as well as a few other outfits in Asia, Latin America and Africa, it focused on markets that were under-recognised.

'"We focused on companies that not only had huge scale potential because they were solving fundamental problems in financial services, healthcare, education, agriculture and logistics; all these different areas that had huge societal impacts as well by giving access to services, products, taking advantage of mobile phone platforms, using technology to leverage. We are starting to see that happening now in SEA,'' he said.

Mr Richards declined to disclose the investment amount, except that the commitment is "significant".

Impact investing, he said, is different from investing based on environmental, social, and governance considerations. He described the latter as "reputation management".

"When you look at impact, it is intentionally improving the situation and benefits to humans and the environment in what you are doing. So, having strong intentions, not just accidental impact."

Capria - which counts International Finance Corporation, Ford Foundation, Vulcan Capital, Omidyar Network and Sorenson Impact Foundation among its investors - joins a growing list of blue-chip investors in Genesis.

Genesis has also secured funds from Sassoon Investment Corporation - the family office of entrepreneur Victor Sassoon - and other corporates, family offices and high net worth individuals across Asia, Europe and the US. Indonesian bank CIMB Niaga became a strategic partner last year with a US$10 million commitment to Genesis to fund fast-growth tech companies in that country.

Genesis was founded by Ben Benjamin and two former DBS bankers, Jeremy Loh and Martin Tang, in 2019. The fund plans to leverage Capria's expertise in impact investing to identify and provide venture financing to companies.

Mr Loh shared that Genesis has seen a 30 per cent increase in deal flows in recent months.

"We are poised to make another five to six investments in the coming months which will double our portfolio size," he said.

The fund is poised to achieve its target size of US$50-70 million by early next year, Mr Benjamin added. He believes that the ability to focus on returns and make an impact on society gives the fund an edge over rivals.

The companies Genesis is looking at are market disruptors that "offer genuine value to people", he said.

Mr Loh believes that venture debt, as a new funding option, will continue to grow rapidly.

"Some private bankers tell us the stock markets are already over-valued and some have gone beyond the pre-Covid levels. When people are looking for returns, they are also looking for differentiated sets of returns. Venture debt is an important and growing asset class," Mr Loh said, adding that Genesis is well positioned to take advantage of this sentiment.

One of the reasons Genesis captured Capria's attention was the fund's ability to generate returns in a shorter time frame than venture equity funds, which typically take up to 10 years to reap potential profits.

"That is actually quite attractive to a lot of investors who want yield and significant upside,'' Mr Richards said.