Investment firm Temasek Holdings has tied up with lender UOB to offer up to US$500 million ($685 million) in venture debt loans over the next five years to Internet start-ups in China, India and South-east Asia.
Venture capital deals usually mean an entrepreneur sells off a stake in the start-up while venture debt involves lending money in return for interest payments and the potential to take a stake at a later stage.
The potential market size for venture debt in the three regions is about US$2.2 billion, UOB said, citing a report by EY.
Temasek and UOB will each commit up to US$100 million of paid-up capital to InnoVen Capital, which will be based in Singapore.
Temasek and UOB will each hold a 50 per cent stake in InnoVen, which will have an issued and paid-up capital of US$60 million.
A BOOST FOR INNOVATIVE FIRMS
Temasek is committed to building InnoVen and promoting growth of innovative companies by working with entrepreneurs and venture capitalists across Asia. This new pan-Asian venture debt financing initiative will seek the next generation of leading companies, providing the support they need to scale and succeed.
MR ONG BENG TECK, managing director of Temasek's enterprise development group
In April, Temasek took its first step towards building what it called a "pan-Asian venture lending platform" by acquiring the Mumbai- based venture debt unit of SVB Financial Group and renaming it InnoVen Capital India.
The firm is India's first and largest venture debt business, bridging the cashflow needs of start-ups between equity rounds of funding.
InnoVen plans to establish subsidiaries in Singapore and China in the coming months.
InnoVen will offer loans to start-ups backed by venture capital in sectors including technology, consumer, healthcare and clean technology which have at least gone through a Series A funding round, said UOB yesterday.
"The collaboration brings together UOB's strengths and depth of experience in the small and medium-sized enterprises segment, as well as Temasek's expertise as an investor in some of the world's top venture capital funds," said UOB head of commercial banking Eric Tham.
Temasek's foray into venture debt financing is part of the investment firm's renewed push to build businesses across all stages, looking beyond portfolio companies to invest in early stage start-ups and providing growth capital to innovative enterprises.
Mr Ong Beng Teck, managing director of Temasek's enterprise development group, said: "Temasek is committed to building InnoVen and promoting growth of innovative companies by working with entrepreneurs and venture capitalists across Asia.
"This new pan-Asian venture debt financing initiative will seek the next generation of leading companies, providing the support they need to scale and succeed."
Venture debt is relatively new to Singapore. In October last year, UOB inked the first venture debt deal for a local start-up when it offered a loan to luxury e-commerce platform Reebonz.