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What a difference these past two years have made!

Whenever I was invited to speak about venture debt in the past, I always start by explaining to the audience that venture debt is a form of business financing that is tailored for venture-backed, high-growth startups who do not have the collaterals nor track record generally required by traditional banks. When used appropriately, venture debt is an attractive form of growth funding because it minimizes dilution of a founder’s (& early investors’) ownership stake.

Fast forward to February 2022 where I addressed a virtual room of startup entrepreneurs from SEA Founders – a community of growth-stage founders in Southeast Asia. I was very heartened by the sophisticated level of understanding about financing tools to power startup growth. Comparing this to when I first started out in venture debt in 2015, these founders have certainly become more acquainted with its use case.

However, I thought it would be useful to clarify some terminology and practices. This will be a handy guide for founders when talking to venture lenders as part of their next fund raise:

Convertible debt is not venture debt.

Venture debt is a bit like a mortgage loan. If we want to buy a house, the bank will provide us with a mortgage loan that we progressively pay down. Before we accept the loan, we would do our maths, asking ourselves, “how much do we have to pay on a monthly basis for this home loan? What are we comfortable with?” Once we decide, we don’t think about it much until the home bank loan is fully repaid. Once fully repaid, the house is ours.

On the other hand, convertible debt is where we borrow money to buy a house, but the lender has the option to decide if he wants the loan repaid in cash or take a portion of the house in return. Here the borrower has to deal with the uncertainty of whether a part of the house may eventually belong to someone else. Hence, a convertible debt is not venture debt.

Shares are not given free to lenders via warrants.

Due to the risk profile of a startup company, venture lenders will ask for warrants, which is an option to buy some shares in the company in the future at an agreed price. I think it’s important to understand that you’re not giving the equity warrants to the lender for free. The lender actually needs to pay and convert the option into shares of the company at a cost.

The way we describe it at Genesis is that we are investing debt into the portfolio company while simultaneously playing the role of small-time equity investor. Because we believe in your company, we’re willing to provide debt financing to grow the company. And because we have done our homework as an investor, we would love to be able to put some equity to play too.

Covenants can be used for instilling financial discipline

Many founders’ initial reaction to covenants is generally negative. However, I believe if designed reasonably, it can bring financial discipline and performance milestones for startups.

Early-stage start-ups tend to have big dreams. Founders would say to me “I am aiming for five million revenue this year and twenty million next year. Based on P&L. I think I am comfortable with a debt to equity ratio of forty percent, so I want to borrow five million dollars in venture debt.” But when we propose business and financial covenants around the loan, founders would come back and revise their projections e.g., “I can’t grow 4x within 12 months.”

A very canny CFO from one of our portfolio companies once shared that taking on venture debt has allowed him to introduce financial discipline within his startup. An example would be working out the mortgage repayment I described earlier and discipline is needed to make repayments on time. Having a venture lender onboard gives him the confidence that he has passed the stringent credit litmus test and he can confidently tell prospective VCs that he has a track record of being financially disciplined. Therefore covenants that are structured reasonably will help companies grow, rather than suffocate. Hence it would be useful to have a candid conversation with your venture debt lender on the purpose of the proposed covenants.

I hope the above “advanced level” clarifications about venture debt is useful for you. For an elementary overview of venture debt, please read this article on the Top 10 Questions Every Founder Asks About Venture Debt.”  If you have any questions on how venture debt can support your startup’s growth, please do not hesitate to contact me.

(A version of this article first appeared on LinkedIn on 28 February 2022.)


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Partner Martin Tang talks to David Kim, CEO Roundtable Bridging Asia podcast host and seasoned banking professional, about his career journey and the use case of venture debt.

In summary:

    • A venture debt is a loan for start-ups to minimise the dilution of founders and early shareholders’ equity stake.
    • Venture debt has been in Southeast Asia for six years; still relatively young compared to US and Europe.
    • We will stand on the shoulders of these giants and learn how to accelerate development.
    • Venture loans work similarly to mortgage loans in that the principal and interest are repaid in equal measure. Usually there is no collateral as startups usually do not have collateral.
    • Genesis’ investment philosophy focused on Southeast Asia; agnostic of sector but must have impact and ESG components.

Read the full interview in the Korea Economic Daily (Korean) here.

Watch the CEO TV (CEO Roundtable Bridging Asia) podcast (English) here.


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19 May 2021/ by CrestBridge

With market awareness of venture debt low, it is private debt’s best kept secret. That hasn’t stopped venture debt from substantially growing its market share of the start-up ecosystem.

Here are 5 reasons why this under-utilised asset class will boom over the next 3 years:

  • It is a growth powerhouse with $47b worth of assets under management in 2021.
  • There are only a few venture debt managers in the market right now.
  • Start-ups like not giving up their equity in return for a cash injection.
  • The returns are high relative to other fixed income investments.
  • The rise of SPACs complements venture debt.

Read the full article here.


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Founded in 2016, Milieu Insight is a consumer research and analytics company that connects businesses directly with their target audience. Milieu’s platform offers businesses a wide range of tools for accessing, analysing, and visualising high-value and timely consumer opinion data to help power better decision-making and strategy in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

By leveraging technology and applying consumer research best practices, Milieu built an opinion-based insights platform to connect communities to organizations, making understanding consumer sentiments and behaviours quick, simple, and fun! Milieu’s mobile app user base has grown from 500,000 users in 2019 to over 2 million users in 2020. It has also increased its enterprise customer base by 300% to 180 customers as of October 2021, up from 45 at the start of 2020.

Recent news: Milieu has raised US$5 million in its latest funding round for product innovation, developing new software as a service-oriented consumer insight offerings, and expanding beyond South-east Asia (11 November 2021).

“Genesis believes that the consumer insights industry is due for a tech upgrade and the strong value that Milieu brings to corporates that want to know what their customers are thinking and where the trends are heading. When we first encountered their research and insights, we knew that Milieu was solving an important, real-world business problem of consumer insights and their approach could revolutionise the industry,” said Dr Jeremy Loh, Co-Founder and Managing Partner at Genesis.

The traditional market research industry was based on primitive methodologies and inefficient processes. Milieu was born out of a conviction that its co-founder and CEO, Gerald Ang, had — that market research should be there to make everybody’s life easier, not tougher. Therefore, he decided to build his own tech-driven automated research product that would operate more efficiently and intelligently, thus revolutionising the way market research is conducted. From Gerald’s perspective, the COVID-19 pandemic has disrupted many industries, but it has only been an accelerator in driving the acceptance of online research.

”Empowering people to share their opinions effortlessly has always been our goal. Our partnership with Genesis allows us to continue building on our positive momentum, improving the user experience of our solutions and reach a wider audience, without experiencing high shareholders’ dilution,” says Gerald.

Recent research published by Milieu include the silent mental health crisis in South-East Asia, the tipping point for switching to electric cars, and where E-wallets stand in the future of payments. Its innovation and insights have not gone unnoticed by the industry, winning the team nine industry awards since 2019, including Campaign Asia’s Most Valuable Product, Marketing Interactive’s Market Research and Programmatic Agency of the Year, as well as several Mobile Experience (Mob-Ex) awards.


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Pace, a Singapore-based fintech solution company that allows customers to ‘Buy Now Pay Later’ (BNPL), today announced that it has raised USD40 million in its Series A investment round. Investors that joined the round include UOB Venture Management (Singapore), Marubeni Ventures (Japan), Atinum Partners (South Korea), AppWorks (Taiwan), and a series of family offices from Japan and Indonesia. Previous investors, Vertex Ventures Southeast Asia, Alpha JWC, and Genesis Alternative Ventures also participated.

Following this investment round, Pace is now the fastest growing multi-territory BNPL player from Singapore. The new funding will go towards expanding technology, operations, and business development, to hit a Gross Merchandise Value run rate of USD1 billion in 2022 and grow its user base by 25X over the next 12 months.

To date, Pace has more than 3,000 points-of-sale across the region, driven by Pace’s ability to increase overall sales up to 25% by leveraging local customer insights, while driving repeat purchases from Pace’s fast-growing base of users.

Launched in 2021 by Turochas ‘T’ Fuad, Pace has successfully grown its overseas operations by working closely with regulators and adapting ultra-local approaches, such as integrating frequently used in-market payment methods to build resonance with merchants and shoppers. It will continue to replicate a hyperlocal framework as it goes live in new countries.

Read the full article here.


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Read the full article here.

Southeast Asia’s business community is buzzing as many of the region’s tech unicorns prepare to go public. Their listings are a validation of the blood, sweat, and tears of their founders, who will be worth millions through the value of their stakes in these companies.

However, according to a Tech In Asia report (26 October 2021), large tech companies that have gone public over the past three years, as well as those that are planning to have an IPO soon, indicates that many Southeast Asian founder have faced greater levels of dilution compared to their peers from other regions.

One possible reason cited for the higher level of dilution is that South-east Asia is not a single integrated market, unlike China or the US.

Another reason may be that most of these companies went through their initial fundraising at a time when venture capital interest in the region was far lower than it is today.

The article also highlighted the rise of venture debt in the SE Asia region could likely to ​improve this dilution problem. Venture debt is seen as founder-friendly, as it helps over-diluting shareholder equity at the early stages of a company’s growth.

On this issue, Genesis’ Managing Director, Jeremy Loh said, ““When these companies went through their initial fundraising rounds, venture debt was not a well-established source of funding in this region. However, the landscape has changed over the past two years. With increased acceptance of venture debt as a complementary financing tool, I am confident that future unicorn founders can retain a larger portion of their shareholder equity”.

Read the full article here.

Read more about venture debt: Top 10 questions Every Founder Asks About Venture Debt


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Did the angel investor, Han Ji-pyeong, in the Netflix show “Start-up” inspire you? While the hit K-drama series was fictional, it offered some interesting peeks into the start-up world and venture capital (VC) funding.

If you are keen on a career in VC, our Managing Director, Jeremy Loh, shares his career journey and some tips:

Genesis (G): How did you get started in the world of venture investing?

Jeremy (J): After completing my PhD in engineering and doing academic research at Imperial College, I returned to Singapore in 2004 and joined A*STAR, the R&D agency supported by the Singapore government.

Did you know A*STAR has more patents than Harvard or MIT? Yet few ideas were successfully converted into real businesses. I’ll share my experience to commercialise one of my patents. My team put together a business plan for an infectious disease diagnostic kit and went out to raise funds. That whole process made me realise that I did not understand the entire concept of starting and running a business.

I have a PhD and was backed by a top-class research team. But at the end of the day, if we cannot commercialise and turn that idea into a business, we are only half successful.

So I started looking at how I could gain experience with the business side of things and came up with two options: I could get an MBA, or join the venture capital industry as it straddled both the technological and the financial aspects of venture creation. Through serendipity, I was presented with an opportunity to join Bio*One Capital, a $1billion healthcare fund under EDBI that invested in medical devices, drug discovery development, stem cells etc.

Looking back, I realised that my entry in the venture capital industry was a transition. What I did was to leverage my domain expertise in precision and bio engineering to open doors into the financial industry.

G: I hear that the VC space is fast-paced and cut-throat. How true is this?

J: One thing that I can say for certain is that I have not had a boring day. Every day I am energised by start-ups and their ideas to solve a pain point through the clever application of technology. Today, it can be a medtech that can diagnose infections faster and tomorrow, it can be a fintech to serve the unbanked majority.

As for the culture, I can only speak for Genesis and the co-investors we partner with. We are family-oriented and collaborative – we constantly share deals with each other. This is an industry built on trust and if you want to go far, you have to build meaningful and positive relationships.

G: What do you look for when you hire?

J: Typically, venture capitalists hire MBAs, serial entrepreneurs, or people with corporate finance backgrounds. At Genesis, we believe in someone who wants to make a difference:

We look for an intellectually curious mind: someone who is not afraid to ask, “why not?”.

Someone who reads extensively to feed that curiosity.

Someone who challenges himself/herself to be in the shoes of the consumer or enterprise who would buy that product or service. This is the hardest skill to learn, as compared to getting a certificate in financial or technology. But it can be learnt.

G: Any pre-requisite technical skills?

J: You would need to have either a technical (engineering) or financial background to begin with. At Genesis, we will train you up and provide you with exposure to:

  • deal origination – networking in the startup ecosystem to get access to the best deals to invest capital
  • financial modeling with Microsoft Excel and analysing financial statements
  • Able to communicate confidently as you will have to present the investment opportunity to the leadership team and investment committee.

G: What advice do you have for undergraduates or fresh graduates who aspire to a career in venture capital?

J: One of the best ways is to serve an internship that is at least 6 months long with a venture fund or financial institution. Why six months? This is the minimum period you will need to gain valuable experience in how a deal flows from origination to execution. Not just one deal, but at least two or three different types of deals in different industries.

At Genesis, our internship program puts the interns through the same pace and vigour as though you are a full-time analyst in the firm. You will meet incredible founders and amazing venture capitalists. You will also work with a team that is fun and diligently trying to find that next Unicorn. We believe investing time to train up the next generation of venture investing talent will eventually have a positive impact for the Southeast Asia startup scene.

Our internship programme runs year-around so do drop your application at contact@genesisventures.co. We will contact you once a position becomes available.


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Our Partner and co-founder, Ben J Benjamin answers some frequently asked questions about venture debt from start-up founders.

1. Who is venture debt for?

Venture debt is ideal for early-stage venture-backed companies that are growing rapidly and that need working capital to fund further expansion, undertake new projects, or acquisition. The key benefit is that founders (and other early investors) do not have to give up as much of their ownership in a funding round. In effect, venture debt can empower growth while minimizing equity dilution.

My colleague, Eddy Ng, shares how to structure your debt for success here: Deal Structure for Venture Debt Success

2. What about interest rates? And collateral?

In terms of payment, founders must consider the following two components:

  • Interest: usually a flat rate of about five to eight percent
  • Warrants: comprises about 15 to 25 percent of the loan quantum.

Given the nature of a startup’s business, very few of them have any collateral to pledge to the loan agreement. Unlike banks,  venture debt lenders will not ask for personal guarantees or collateral. Instead, lenders will ask for warrants and include covenants to ensure repayment.

3. What are the typical payment terms?

The loan usually has to be repaid within 36 months, fully amortized. The warrant is separate from the loan. Depending on the company’s lifecycle or nature of business, the warrant period can be anywhere between five to 10 years. The venture lender would be free to exercise the warrant during this period.

4. Can I buy back my warrants?

In most cases, the buyers of warrants are usually the founders and/or their existing investors. While the stakes are not huge – warrants generally represent a maximum of two percent of the company – it is a good opportunity for such parties to increase their stakes before a liquidity event (such as an M&A, IPO, or trade sale, for example).

5. My start-up is constantly approached by venture funds. Why should I consider venture debt, even though the interest rate is not much higher than banks?

When raising funds, the key issue that entrepreneurs and investors alike face is equity dilution.

Just imagine if you could raise 20 to 30 percent of the entire series in less dilutive debt. (There is minimal dilution as the warrants may be exercised at some future date when the company is successful, as pointed out above in #4.)

Instead of taking that 20 to 30 percent equity dilution at the early stages of the company’s growth, it makes sense to use venture debt to minimize dilution, especially if you have the conviction that the business will increase in value over the long term.

6. As an entrepreneur, I can go to my existing equity investors and raise convertible notes. Why should I consider venture debt?

Many founders ask this question. A convertible note is generally converted into equity when the business performs well. So, it is not less dilution – it is just delayed dilution. And that dilution is 1:1; in the final analysis, it feels like full equity dilution.

7. Venture debt funds add little value to entrepreneurs.

There is a misconception that venture debt funds exit from the start-ups as soon as the loan is repaid. However, the reality is that venture debt funds do have skin in the game. As warrant holders, we are very much interested in the long-term success of the company. In fact, several of our portfolio companies have returned to us for additional debt because they enjoy the benefits of our experience, networks, and value-add.

8. I like the idea of minimizing equity dilution. Can I use 100% debt to fund my business growth?

As with any company, a balanced capital approach is important when building your books. Just as we would say there is a space for venture debt on the balance sheet for early, high-growth tech companies, it would be unrealistic to suggest that debt should take up the lion’s share in the growth journey.

Venture debt is just one of the many options available for businesses. There are many tools for fundraising, so pick the most appropriate one in the context of your existing capital structure, shareholding, and business plans.

9. When is the right time for start-ups to use venture debt?

Timing is everything. A company that is too young (with poor cashflows, or without a strong balance sheet) will find it difficult to raise venture debt. A company that already has a capitalization table with good investors on board, and has either a strong balance sheet or strong cashflows, will find it easier to raise venture debt from a well-known lender.

It is also worth considering raising venture debt in conjunction with an equity raise. This allows the company to access additional cash to extend the runway to help achieve a larger milestone and a higher valuation at the next round of financing.

10. Any advice for founders when approaching venture debt providers?

We appreciate founders who are honest and forthright from the start. The journey to build a successful business will take three-, five-, or 10-years, so mutual trust is very important.

So, start a conversation with a venture debt provider, even before you need to raise debt. Take time to understand how venture debt works, and the key terms that come with it. Help us understand your industry, business model, and plans. This will accelerate the process when you are ready for venture debt.

Finally, choose your venture debt partner with care. Many founders focus their venture debt conversations on price and loan quantum. They should also consider choosing a venture lender who can be a long-term funding partner, and ask important questions such as, “Am I dealing with a venture lender who understands how a start-up grows and can the lender add value?”, “What is their track record of working with companies that hit hard times?”, and “Will they take a long-term perspective?”.

If you have any additional questions, please do reach out to Ben.


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Martin Tang is the reading champion in Genesis – he is an avid reader and believes that reading of the experiences of people that have gone before is one of the best ways to learn.

If you aspire to a career in financial services, especially in the venture capital space, Martin recommends the following books to help you hit the ground running.

 

  1. The King of Capital: The remarkable rise, fall and rise again of Steve Schwarzman and Blackstone by David Carey and John E. Morris

Blackstone is one of the world’s largest asset managers. Like everyone else, their founders struggled initially. What is interesting is how they transformed themselves into disciplined investors and challenged the financial establishment. I enjoyed the deep dive into some of their signature deals.

 

  1. What it takes: Lessons in the pursuit of excellence by Steve Schwarzman (co-founder of Blackstone)

As you can tell, I am a big fan of Blackstone! Steve Schwarzman is the grand daddy of the investment industry. He took US$400,000 and co-founded Blackstone – a firm which manages US$684 billion (as of Q2 2021). He generously shares his expertise and insights on what it takes to achieve excellence. I am always re-reading this book because I find new wisdom every time.

 

  1. Good to Great: Why Some Companies Make the Leap…And Others Don’t by Jim Collins

This is an excellent book – backed by tons of deep data and research and is well-written. It is full of insights about why some companies go from good to great, while others fail for the same reasons. What intrigued me is the “curse of competence” that hinders companies from achieving greatness. I will not spoil it for you; read the book and find out!

 

  1. Laughing at Wall Street: How I beat the pros at investing (by reading tabloids, shopping at the mall and connecting on Facebook) by Chris Camillo

Investment success is not mystical. It comes from being very observant of your surroundings and identifying trends. This book is full of engaging anecdotes and common-sense explanations.

 

  1. David & Goliath: Underdogs, misfits and the art of battling giants by Malcolm Gladwell

This is a classic Malcom Gladwell book where he sheds light on how we think about disadvantages and obstacles. We all know the story of how a shepherd boy, David, felled the mighty Goliath with a sling and a stone. The author challenges us to re-think about the “Goliaths” in our lives and what successes can arise out of adversity.

 

  1. Outliers: The Story of Success by Malcolm Gladwell

Another classic by Malcom Gladwell. Backed by data, he traces the reasons for the success of some overachievers. What do Bill Gates and top football professionals have in common? Are they really that much more different from us normal folks? This book changed the way I looked at success.

We hope this list will help you become a more successful version of yourself.