United Overseas Bank Limited (UOB) has entered into an agreement with Temasek to provide venture debt financing to start-ups in China, India and Southeast Asia.
According to an EY report on venture debt, the potential market size for venture debt in Singapore, China and India is US$2.2 billion. To help meet this demand, the UOB-Temasek joint venture will provide up to US$500 million in venture debt loans over the next five years to high growth, innovative start-up companies operating in sectors such as technology, consumer, healthcare, and clean technology.
As part of the agreement, UOB will acquire a 50 per cent interest in InnoVen Capital (InnoVen), a wholly-owned subsidiary of Temasek. Subject to relevant regulatory approval, InnoVen will be a UOB Temasek joint venture. UOB and Temasek will each commit up to US$100 million of paid up capital to the joint venture.
Mr Eric Tham, Managing Director and Head of Commercial Banking, UOB Group, said that the collaboration brings together UOB’s strengths and depth of experience in the small and medium enterprises segment, as well as Temasek’s expertise as an investor in some of the world’s top venture capital funds. “Venture debt is important as it enables more of Asia’s best start-ups to develop into world-class companies. We can see this in China and India which have vibrant start-up ecosystems, while Singapore is establishing itself as the start-up hub of Southeast Asia,”
“Our joint venture with Temasek will encourage an even more vibrant community of entrepreneurs in these markets by providing an alternative for these start-ups to accelerate the commercialisation of their business and to increase the valuation of their business without the need to pledge additional collateral or dilute their stake in the company.”
Mr Ong Beng Teck, Managing Director, Enterprise Development Group, Temasek 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.”
InnoVen is India’s largest provider of venture debt to high-growth innovative companies. In addition to the operations already established in India, the joint venture will establish subsidiaries in Singapore and China in the coming months to offer venture debt to fast-growing innovative companies in these markets.
UOB offers venture debt financing to Singapore-based high growth companies Singapore-based start-up Reebonz is one such company that has used venture debt to meet its financing needs without diluting its equity.
In October 2014, UOB signed the first venture debt financing deal for a Singapore start-up when it offered Singapore-based luxury e-commerce e-tailer and marketplace Reebonz a venture debt loan. The venture debt loan from UOB was provided at an early stage of Reebonz’s expansion, thereby supporting Reebonz’s continued growth.
Mr Samuel Lim, CEO of Reebonz, said, “Venture debt financing from UOB has allowed Reebonz to bridge our capital and operational needs, further supplementing venture capital funding. In addition, this has allowed more flexibility in our funding options and allowed Reebonz to continue growing our business.”
Through the use of venture debt, UOB has also supported Heptagon, a provider of intelligent micro optics systems for smart devices, in achieving rapid growth over the last few years.
