TNB Aura launches special situations fund for startups hit by Covid-19

VENTURE firm TNB Aura has launched a new special situations fund to invest in startups hit by the Covid-19 outbreak, with cheque sizes of about US$2 million each, the company announced on Thursday.

The special situations fund may be structured as a sub-fund of TNB Aura's upcoming second venture fund, which is targeting a US$100 million final close, TNB Aura's co-founder and managing partner Vicknesh Pillay told The Business Times.

And if the gloomy economic sentiment becomes prolonged, resulting in a "continued flow" of startups struggling with cash flow, "the special situations thesis will extend into the rest of our second fund", Mr Pillay added. Investors in the special situations fund include TNB Aura's existing limited partners, along with new institutional investors from South-east Asia.

"Taking into consideration the impact on Covid-19 on most businesses, gross revenues have been slashed by large percentages for the majority of the companies, therefore, reducing their runway to achieve their pre-planned business milestones," he said.

"With the additional funding and resources from TNB Aura, Series A and B stage startups would be able to extend their runway to continue focusing on these targets while the fund assists with cost optimisation so investees companies may better weather these turbulent times."

But the fund is not targeted at buying out the debt of distressed startups, Mr Pillay said, adding: "We believe in aiding fundamentally great companies which have been affected by this unforeseen circumstance."

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The special situations fund will invest via a "range of funding structures", such as equity or convertible notes. The financing is aimed at providing startups an extended runway of 12 to 18 months. The fund will have a typical venture fund life of eight years, with the option to be extended by two years.

When asked about potential investees, the Mr Pillay said that "there have been multiple requests from companies whom we felt were overvalued (previously) coming back to us to raise additional capital at prior round terms." In addition, TNB Aura also has a pipeline of investment opportunities for its second fund, that are currently in the due diligence phase.

The special situations fund is not targeted at TNB Aura's existing portfolio companies, for which TNB Aura has already been providing help with cash-flow management on a monthly basis.

"We have also assisted the majority of the companies with their cost-cutting measures and HR (human resources) optimisation. Most 'top ups' for existing companies would be from the same fund from which the first investment came from. To manage conflicts, the new fund would be looking to onboard new portfolio companies," Mr Pillay said. TNB Aura has previously backed startups including clear aligner maker Zenyum and software player TradeGecko.

Startups interested to receive the backing of the special situations fund can apply through a form https://tnbaurafund.typeform.com/to/EyT1kP on TNB Aura's website.