ADDX Fractionalises UOB and Temasek’s Venture Debt Fund to US$20,000by Fintech News Singapore December 7, 2022
This move brings down the minimum subscription size for individual accredited investors from US$5 million to US$20,000.
The Innoven SEA Fund I provides venture debt funding to high-growth startups and technology companies across Southeast Asia.
The fund is anchored by a US$50 million commitment from Seviora and UOB, and it provides investors a combination of fixed income and equity return, with annual cash distributions.
Venture debt is a form of debt financing for companies that are still dependent on venture capital funding to grow.
Loans sizes can go up to 30 percent of an equity round or cash in bank, and loans are made out based on factors such as the strength of the startup’s shareholders, the quality of its management team as well as the firm’s competitive advantage.
For startup founders, venture debt is less dilutive than equity financing, allowing companies to extend their cash runways and secure more time to achieve growth milestones.
Paul Ong, Partner of Innoven Capital SEA said,
“The macroeconomic climate and interest rate hikes that have impacted company valuations have led to cautious deployment of capital from equity investors.
Companies have shifted their focus to decreasing their burn rate and building cash reserves in anticipation of a potential near-term period in which equity capital may be more difficult to obtain. In this current environment, the demand for venture debt has increased significantly.”
Oi-Yee Choo, CEO of ADDX, said:
“Venture debt is poised to grow. In the US, where the ecosystem is more mature, venture debt deals make up around 25 percent of venture capital funding. In Southeast Asia, that figure is less than 5 percent.
This strongly suggests there is room for expansion, as venture debt funds raise more capital from investors and deploy that capital in a region where the prospects for tech startups remain bullish in the medium- to long-term, despite the uncertainty we’ve seen in the capital markets this year.”