SINGAPORE-based Genesis Alternative Ventures (Genesis) on Friday said it has launched a venture debt business to target the booming startup market in South-east Asia.
The Business Times understands that the company intends to raise some US$70 million over the next 12 months.
Genesis is anchored by Sassoon Investment Corporation, the family office of the Sassoon family, who are shareholders of The Coffee Bean & Tea Leaf; and PT Bank CIMB Niaga, as a strategic partner in Indonesia. CIMB Niaga is the second-largest private national bank in Indonesia by assets.
According to Genesis, venture debt is a form of financing for young high growth businesses that are gaining traction and need to extend their cash runway in order to get to the next stage of growth. These companies may lack the cashflows or track record to meet the traditional criteria for bank loans, or their founders may wish to minimise equity dilution.
Generally, venture debt is deployed by way of senior, secured non-convertible debenture, accompanied by equity options. It complements venture equity financing, and fills a space not well served by banks, Genesis added.
Genesis has thus far backed three companies, with eight more in the pipeline. The three startups are Singapore-based Horangi Cyber Security; home-grown online restaurant, Grain; and Indonesia's premium flexible workspace provider, GoWork.
Said Genesis managing partner Dr Jeremy Loh: "We expect venture debt to become a mainstream source of financing for companies across South-east Asia. We see a robust pipeline of companies coming through and we believe that entrepreneurs value the need for a judicious balance of debt and equity to fund their expansion.
"Singapore is a major hub for tech startups aiming to capture the region's rapid growth, huge markets and youthful, mobile-savvy consumers. The recent enhancement to Enterprise SG financing scheme announced during Singapore’s Budget 2019 has broadened the availability of venture debt to emerging companies."
Looking ahead, Genesis said the outlook for venture lending in South-east Asia is bright, going by the track record in the US. Citing recent reports, Genesis noted that two of the leading venture lenders in the US, namely Silicon Valley Bank and Hercules Capital, accounted for about US$12 billion of venture loans as of 2018.
Last year, South-east Asia saw a record US$11 billion going to tech companies, almost double that of the US$5.8 billion invested in 2017. Singapore and Indonesian companies received the lion's share of the funding last year, with a maturing cohort of companies into Series B and C funding. These companies are prime to take on venture debt financing, Genesis explained.
The company, which is South-east Asia's first independent venture debt business, was founded in 2018 by Dr Loh, Ben J Benjamin, and Martin Tang.
Mr Benjamin is the son-in-law of Sassoon family patriarch, Victor Sassoon, and non-executive director of Israel-based online venture capital platform, OurCrowd Singapore.
Meanwhile, Dr Loh and Mr Tang also have experience in venture lending and equity investing, and spearheaded DBS Venture Growth Partners, specialising in venture debt from 2015 to 2018.