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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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Ben J Benjamin answers some frequently asked questions about venture debt.

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.

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

2. What about interest rates?

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

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

3. What are the typical payment terms?

The loan usually has to be repaid within 36 months, fully amortised. 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 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 dilution at the early stages of the company’s growth, it makes sense to use venture debt to minimise 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 the 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 and value-add.

8. I like the idea of minimizing 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 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 fund-raising, 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 capitalisation table with good investors onboard, 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.


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Over the past two years, we have seen how the global pandemic adversely affected companies across a wide range of sectors from the implementation of lockdowns and travel restrictions, to an increase in the visibility and transparency of supply chains. Despite being a difficult year for numerous businesses, many startups, especially in the Southeast Asia region have powered through.

While the global pandemic will eventually recede, the impact of business decisions made during these pressing times will go a long way. Startups that raise capital and have a spare dime for rainy days like these will have an edge.

Cash Burn J-Curve

One of the most persistent challenges for startups is to sufficiently capitalize the business from the inception of the company until profitability. US startups have had the good fortune of leveraging on venture debt for several decades. Despite a very challenging Covid year in 2020, startups in the US received debt financing valued at more than $25 billion[1], the third consecutive year for the market to surpass $20 billion in venture loans.

Most startups traditionally utilize equity as their source of capital and go on to raise billions of dollars to fund the J-curve growth of their business. The J-curve is commonly used to illustrate the tendency of a startup company to produce negative net income initially, and then deliver accelerated positive results as the company matures. The negative net income area above the “J” represents the total cash needed to achieve profitability and the typical startup company will take at least six years before becoming profitable.

 

Fig. 1 – J Curve

Source: https://pitchbook.com/news/reports/q1-2021-pitchbook-analyst-note-venture-debt-a-maturing-market-in-vc

Blend of Venture Equity and Debt Capital Markets

As venture debt has emerged in Southeast Asia, an increasing number of companies have deployed debt financing to complement equity rounds. To date, there are about 80 – 100 Southeast Asia companies that have already benefited from venture debt.

Genesis Alternative Ventures is a Singapore-based venture debt fund that invests debt capital into promising early-growth startups that are expanding their business presence across Southeast Asia. We will feature 2 Genesis portfolio companies – Horangi Cyber Security and GoWork and share their venture debt journeys.

Example 1. Horangi

Founded in 2016, Horangi is a cybersecurity company that provides security support for enterprises in Asia against cyberattacks through its suite of products and professional advisory services.

Venture debt became a useful, less-dilutive tool for Horangi as it enhanced its cloud security products, increased its talent pool and acquired customers through sales and marketing activities as part of their growth and expansion plans. “As a startup with a short operating history, it is almost impossible to get normal bank loans, which is where venture debt fills in the gap.” Horangi was also looking for partners who could add substantial value to their business and “partnering with strategic investors like Genesis will help propel our next growth stage,” said Paul Hadjy, CEO and Co-founder, Horangi.

“As Horangi scales its business, choosing a venture lender who is committed and understands the business is critical. It’s not only about access to capital, but also the flexibility and the invaluable network that Genesis brings along.” – Dr. Jeremy Loh, Managing Partner of Genesis Alternative Ventures.

Example 2: GoWork

Founded in 2016, GoWork is a leading premier co-working space operator in Indonesia.

“Co-working is not a category anymore, it’s just how people work. It’s a matter of time when every office building or mall in Jakarta will need a space.” For GoWork to double down on its focus on Jarkarta and reach over 100,000 sqm by 2020, the company took on venture debt to fund its working capital. “We wanted to have diversification in our capital structure without incurring dilution,” said Vanessa Hendriadi, CEO & Co-founder, GoWork.

Not only does venture debt help with working capital needs, but entrepreneurs are also seeking “more efficient capital and putting in place additional capital buffers”. – Martin Tang, Co-founder of Genesis Alternative Ventures.

Venture Debt Moving Forward

Venture debt offers an additional channel of financing for entrepreneurs who want to leverage debt financing to balance the cost of capital. Venture debt is set to play a bigger role as more startups are growing amid a global pandemic and are looking for ways to raise additional capital without significant dilution to their equity stakes.

To find out more about venture debt, access the Southeast Asia Venture Debt Industry Report 2021 co-authored by Genesis Alternative Ventures and PwC Singapore here.

[1] https://pitchbook.com/news/reports/q1-2021-pitchbook-analyst-note-venture-debt-a-maturing-market-in-vc



 

In Southeast Asia, venture debt is fast emerging as an alternative and complementary source of financing for high-growth technology companies that traditionally only raised equity as a source of capital.

At its core, venture debt is entrepreneur-friendly as it helps founders and cash-hungry startups avoid over-diluting shareholder equity at early stages of a company’s growth. Used appropriately, venture debt can also extend the cash runway between fundraising rounds, sometimes helping companies achieve performance targets set by equity investors (or avoid dreaded valuation down-rounds). Another benefit of venture debt is that, in appropriate instances, it is able to support companies facing unexpected market turbulence or short-term capital traps.

While already an established alternative financing source in the US, Europe, Israel and India, venture debt has only recently emerged in Southeast Asia as a mainstream financing option for high growth tech companies. In 2015, the Singapore Government identified venture debt financing as a key driver to boost the local start-up ecosystem. Singapore launched a S$500 million venture debt programme to encourage qualified lenders to provide venture debt to technology start-ups. In recent years, there has been a marked increase in venture debt activity in the region.

For more information, download the full report here.

Visit PwC’s Singapore Venture Hub


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In the past few months, the level of inbound enquiries Genesis has received for venture debt has increased by 30%. This has been the case too for other venture lenders across tech ecosystems where venture debt is an established asset class. In a parallel world, large corporates, as well as PE-backed companies, have been drawing down on available credit lines as an insurance buffer.

Please read part I: Venture Debt – Panacea or Poison – for tech-backed companies during Covid-19

There are many reasons for the increase in venture debt enquiries:

  • Venture debt for runway extension/insurance buffer: Venture debt can help a company to extend cash runway with lower dilution; Savvy VC investors and founders realise the wisdom in bolstering the balance sheet in times like these. It is better to have venture debt and not need it than to need it and not have it.
  • Venture debt as part of funding to avoid a downround: With COVID-19 decimating business plans, founders realise the need to raise capital in a form that delays the valuation benchmarking – raising venture debt / convertible rounds can help the company buy time as it adjusts to disruptions caused by the pandemic.
  • The colour of cash is the same: Founders not knowing the difference between equity and debt. They knock on both doors hoping that one would open.

So when can venture debt be a panacea to startups in COVID-19?

1. Extension of cash runway

The pace of VC investments may slow down during a crisis, it will not stop. Good tech companies will still be able to raise VC money. With the equity cash, these companies can then extend its cash runway with some venture debt. 

Related Article : Deal Structure for Venture Debt Success

Notwithstanding the current crisis, startups with a viable model and differentiated offering continue to attract equity funding. 

In the US, there continues to be high profile funding rounds being announced.

  • Payment gateway, Stripe raised a US$600m Series G at a US$36bn valuation; 
  • Online brokerage Robinhood Markets Inc raised US$280m led by Sequoia Capital valuing it at US$8.3bn

Closer to home, we are seeing green shoots of larger than usual funding rounds being completed than pre-crisis :

  • Dathena raising a US$12m Series A round;
  • Kopi Kenangan raising a US$109m Series B round; 
  • Kargo, an Indonesian based logistics company raised a US$31m Series A;
  • Ninjavan raised a massive US$279m Series D funding round;
  • Indonesian consumer goods mall GudangAda raised US$25.4m in a Series A round led by Sequoia India and AlphaJWC;
  • Philippines media startup Kumu raised a US$5m Series A; 
  • Thai venture builder RISE raised US$8m in seed funding

A strong equity raise combined with a right proportion of venture debt, will help a startup to extend its cash runway at a lower dilution than a full equity raise. The cash runway extension will allow companies to grow further before the next equity raise – this will potentially allow it to raise equity at a higher valuation, again leading to lowered dilution.

2. Bolstering balance sheet as insurance buffer

  • For companies that have a reasonable amount of cash on their balance sheet, venture debt is a viable way to further boost that cash as an insurance against a protracted downturn.
  • In the US, AirBnb managed to raise US$2bn in equity and debt over two separate transactions in April. 

In the case of AirBnb, it raised US$2bn in equity and debt in two separate transactions despite having US$3bn of cash on its balance sheet. It was notable that funders were large private equity groups. Media reports of the deal terms and structure suggests that the funding was structured similar to how a venture debt deal could have been done. 

Had AirBnb raised the same amount of funds via a sale of shares, it would have resulted in higher equity dilution, longer execution timelines and crystallisation of a lower valuation meaning that later investors would lose money.

3. Avoiding crystallising a down round:

  • Companies whose business plans have been affected by COVID-19, i.e. will not be able to achieve milestones prior to next equity raise, can use a mix of internal equity funding (usually in the form of a Convertible Note) and venture debt to extend cash runway.
  • This combination provides the company with much needed cash runway extension and yet avoids setting a valuation benchmark. However, it means that the company has to get things right this time.
    • The comfort is that many successful startups have experienced such situations before and gone on to increase valuation by multiples thereafter

Related Article : Venture Debt Market Reaches All-Time High According to Largest Study Ever

Venture debt, if not used under the right circumstances, can be poison.

1. Venture debt as a funding of last resort

We have seen many companies come to Genesis because they have exhausted other avenues of capital sources- whether they be VC money or loans. Venture debt cannot be used as funding of last resort as this is akin to taking equity risks, with a capped return.

2. Venture debt as a source of cheap funding

The other reason for increased enquiries is due to misconception that with global interest rates at rock bottom, venture debt rates must be low as well. On the contrary, most startups are now deemed to be higher risk due to the economic disruption brought about by COVID-19. Therefore, on a risk adjusted basis, venture debt rates have remained  flat or slightly higher than pre-COVID-19.

Genesis’ approach to venture debt in COVID-19

COVID-19 has not changed how we fundamentally assess each deal. Despite the increase in venture debt enquiries, deployment of capital is reserved for borrowers that demonstrate the following characteristics:

  1. Sustainable business plan with proven revenues and positive unit economics 
  2. Founders with demonstrable leadership and management experience
  3. Backing and guidance by Tier 1 VCs
  4. Cash runway of at least 12 months

Venture debt is not without its risks, however a well structured transaction can help high quality companies to extend their cash runway to tide through tough times.


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At this time of writing, numerous countries and cities remain in lockdowns of varying degrees with shops, businesses and schools staying closed. The inconveniences this has brought to daily life/businesses are well documented. I want to share some of my observations on the positives that the lockdown has brought about.

In these unprecedented times, humans have demonstrated the ability to react quickly to the new environment – the speed at which COVID-19 changed the way things were done was breathtaking. 

Online-everything. Online services given by religious organisations, online motivational sessions, online ministerial meetings, large scale online press conferences and interviews, online marathon races, online workout groups, online clubbing, online house parties…the list goes on.

New words for the old economy. WFH, e-sign, Paynow, Home delivery, contactless delivery, Zoom Meeting, Teams, Google Hangouts, Whatsapp call, House Party etc. have become de rigueur. 

Pivoting. Garment and car manufacturers switching to producing face masks, microbreweries and gin distilleries producing hand sanitiser, Vacuum cleaner factory line producing ventilators, Luxury hotels becoming quarantine centres. 

Related Article : Venture Debt for tech-backed companies during Covid-19

Reimagining work. I had the privilege of conducting a session of the inaugural online career fair of a local university last month over Zoom. We had more than 50 attendees dialling in from their respective homes/offices. Prospective interns watched their screens, listening to what was being shared. They were actively raising hands virtually and asking questions via the chat function. That people felt safe, physically and metaphorically, to ask questions was a big win. All in all, we had an extremely successful career fair with high engagement levels and applications. It is not inconceivable that with video technology / online KYC, workers getting hired without having to physically see a hiring manager prior becomes more prevalent.

Humans have gone through disasters much worse than COVID-19 and thrived. What makes me hopeful is that we have more advanced science and technology at our disposal now than ever before. I am of the firm belief that we will get through and thrive in the same fashion.

“This too shall pass”. The current lockdown is an opportunity to catch up on things that matter and make us better people. Eventually, activities will return to a semblance of normality. The question then would be, ”Did we make use of the lockdown to position ourselves for a rebound?” This could be learning a new skill, pivoting a product to suit social distancing measures, refining workflow processes etc.  

At Genesis, we are making full use of this time to do the following:

  1. Housekeeping / Refining internal SOPs
  2. Continued engagement with our portfolio companies with a view to supporting them / exploring new business opportunities / making new introductions to them
  3. Active outreach to LPs both existing and potential to update them on investment portfolio, what new deals and trends we are seeing 
  4. Talking to our VC Partners to update them on portfolio companies as well as exchange notes and dealflow
  5. Engaging with ecosystem partners to explore collaboration opportunities that we never had the chance to do so pre-lockdown – they could be webinars, industry thought pieces, mutual introductions etc.

We did not choose for COVID-19 to come disrupt our lives, but we certainly can choose what we want to do with our lives / businesses while we go through this period.

Stay strong and stay healthy.


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Great companies that take venture debt often share several characteristics – solid business fundamentals with strong unit economics; a clear understanding of who the customer is; remarkable founders and leadership teams that execute well; and more often than not, top-tier equity sponsors that bring invaluable investing experiences with them.

A solid Deal Structure plays a vital role in Venture Debt success.

When companies think about raising venture debt, they often think about getting the lowest interest rate. However, there are other critical elements in a venture debt deal that are perhaps not as obvious and the venture debt deal structure is certainly one of them. 

Like any well-built house, it is important to have a sound structure. A sound deal structure is no different. The optimal venture debt deal structure not only plays an important role in helping companies maximise their cashflow potential, but it also ensures alignment of interest between the lender and the borrower and serves as a foundation to help companies raise new equity rounds in the future at higher valuations. As Warren Buffett reminds us, “Only when the tide goes out that you learn who has been swimming naked.” Poor structuring could have a trickle-down effect that could hinder companies’ ability to repay which in turn becomes an obstacle to future equity raises. 

Questions for every startup

Now I know you’re asking, “So what’s the most ideal venture debt deal structure?” First, we seek to understand what the debt is really being raised for (e.g. to fund working capital, growth expansion, refinance, acquisition)? Second, what is the real cash runway in the different growth scenarios? Third, how might a downturn (as we are experiencing now) affect the ability to repay? 

Related Article : The Venture Debt Investors Journey in Southeast Asia

Depending on the answer to these (and many other) questions, we think about the kind of debt structure that would suit the needs of these companies. It can be an amortising term loan with a 2 to 3 year repayment period; a revolving line of credit (or revolvers); or even revenue-based financing where debt repayments are tied directly to the company’s revenues. No two businesses are the same, and so no two deal structures should be the same either.

Amortising Term Loan

What if a company wants to use venture debt to fund expansion, buy equipment or acquire another target company? For these longer-term assets, they should ideally be financed with longer-term liabilities such as term loans. The company borrows, say US$1m today, and pays a combination of principal and interest over the term of the loan with the entire amount being repaid by maturity. The exact terms will also vary from company to company depending on their risk profile. 

Revolving Line of Credit

A revolving line of credit helps to smooth out fluctuations in working capital that seasonality or delayed invoice payments can cause. For instance, an eCommerce retailer wants to fund a seasonal inventory build-up between September to December for Christmas sales. This creates a need to fund the increase in inventory and account receivables. 

Related Article: Launch of Southeast Asia Independent Venture Debt Financing Business

A revolver will be most useful in this scenario to cover for the company’s short-term operational cashflow needs. Unlike a term loan, the borrowings are repaid once the account receivables from the sales peak are collected, for example 60 days later.

Revenue-based Financing

This form of financing is mostly suitable for companies with high gross margins and subscription-based revenue models (such as SaaS). With a meaningful traction from the monthly recurring revenue and low churn, monthly repayments will be based on a certain percentage of the monthly top line revenue. 

If you like to explore raising venture debt as part of your overall capital needs, drop us a note and we will work with you to understand your needs. 


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The first quarter of 2020 whizzed by so quickly. In continuation to my previous post, let’s dive into what a founder should look at when considering venture debt. First up, venture debt is not convertible debt. I still get asked a lot if we can do convertible financing. The straight answer is no. Venture debt is a form of debt investment that augments a portion of the equity need. It also provides a funding mix shift for equity-sponsored start-ups who are raising early growth capital here in Southeast Asia.

Clever mix of venture equity and debt capital markets

Most startups have negative working capital and operate in a dynamic and uncertain environment. Even more so in today’s climate. As a founder who is embarking on a fundraising plan and doing an extensive financial modeling exercise, the appropriate question to ask should be (1) do you raise 100% of what you need, or (2) 100% plus some extra buffer? Let’s take the current Covid situation to illustrate the financing conundrum. If a founder had raised adequate funds without any buffer, the unforeseen decline in business could put the company in a precarious situation and financing dilemma. Reducing the opex is one way of extending the runway, or raising some cash buffer initially could have helped cushion some of the impact. 

How much debt should a founder seek to raise

Assuming a founder needs $x million of capital to take the business to the next value inflexion point. The founder now has an option of raising $x + $y million where y is the venture debt amount and x represents the equity portion. Some founders opt to raise $x – $y million where the difference is the equity portion. This alternative allows the founder to minimize equity dilution and this stems from the venture lender entitlement to some option rights as part of the transaction. Venture lenders also typically limit average equity to debt ratio of 3:1 to avoid an overleveraged situation.

Read More : The Venture Debt Investors Journey in Southeast Asia

Highlights of venture debt transaction

There are several key terms in a venture debt capital markets transaction, with reference to deals here in Southeast Asia. Interest rates are typically in the low-teens and venture lenders would ask for a small fraction of equity (<2%) as a warrant option. These terms would be risk-adjusted based on parameters such as the stage of the company (e.g. Series B vs Series A), quality of equity sponsor, and country of operations etc. Depending on the quantum, there are commitment and legal fees involved which may be upwards of 1.5%.

A start-up’s perspective of venture debt

Horangi Cybersecurity was Genesis’ 1st venture debt portfolio and just recently in March 2020, the company announced it has completed a Series B round (https://www.horangi.com/blog/horangi-raises-us20m-to-strengthen-cyber-security-offering-in-southeast-asia). Kevin Lee, Executive Chairman, Horangi Cybersecurity shares his experience with venture debt. As a leading cybersecurity company in South East Asia, Horangi is growing and expanding fast. Kevin highlighted the challenges faced by a young startup and said “our working capital needs are growing even faster, as we need to spend up front to acquire customers through sales and marketing activities, while collecting revenue over the lifetime of the customer. We therefore knew we wanted to take some debt capital markets to complement our equity capital as it is a good fit with the financial profile of the business, and could allow us to continue growing while reducing our dilution. As a startup with a short operating history, it is almost impossible to get normal bank loans, which is where venture debt nicely fills in the gap as venture debt providers know how to underwrite startups much better than banks”. 

Read More : Venture Debt for tech-backed companies during Covid-19

Kevin goes on to share how he eventually decided to go with Genesis. He said that “because we were not just looking for capital – we were looking for partners who could add substantial value to our business. Genesis sets themselves apart from the other venture debt providers in the region on this front, whether it is in terms of helping us with business development to introduce potential partners and customers, advising us on strategy and fundraising, and even government relations. We are very happy that we chose to work with Genesis and look forward to building the company together with them over the long term”.

A venture lender wants to be aligned with the best interest of the founder, the company and the venture investors. Conversely, look for a venture lender who is committed and understands the business needs. The outcome will be a win-win situation for everyone.


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In a recent article, Private Debt Investor reported that “venture debt is blossoming” and suggested that “venture debt will surf” in Covid-19’s wake. US venture debt companies are reporting an uptick in dealflow from both existing and new clients notwithstanding “startup layoffs and drying up deal opportunities”.

This might sound counter-intuitive; why would companies leverage up during these difficult times? 

Understanding the principles around venture debt might provide an insight into this emerging trend and help leadership teams assess the suitability of venture debt as a financing option.  

Venture debt today

According to Kruze Consulting, US$10bn of venture debt was raised by venture-backed companies in 2019 in the United States alone. Venture debt raised by companies in Southeast Asia is at a fraction today. However, venture debt financing is growing strongly in the region partly given the massive inflows of equity funding (which is a forerunner of venture debt), the maturing ecosystem generally and maturing companies that benefit from alternative forms of funding, including less-dilutive funding, as these companies grow. 

Cash is king

Raising venture debt to extend the runway in order to allow the company to gain additional value by the next round of financing has been a key attraction to raising venture debt. Given today’s environment especially, where most companies will be confronted with revenue and growth pressure over the next 6 to 12 months, adding cash to shore up the balance sheet in order to extend the runway is probably a good idea for most leadership teams (and their investors). This is especially so in the case where VCs slow-down funding in the immediate quarters to come. 

Read More : Repost: Venture Debt Market Reaches All-Time High According to Largest Study Ever

Flight to quality

Investors are more and more pivoting towards profitability over growth. WeWork’s troubles, coupled with the woes of SoftBank Vision Fund, probably accelerated this view in the last months of 2019. This is now further exacerbated by the new realities of Covid-19. Companies that prioritise profitability (or cashflows) over growth form the staple of venture debt lending. At Genesis, for example, a key part of our investment approach is to seek out solid equity-sponsored companies with strong positive unit economics and without heavy leakage into buying growth. Your company should consider venture debt funding if this sounds like you. 

Less-Dilution

Strong companies will continue to successfully fundraise during Covid-19. Historically there have been many opportunities for companies, founders and investors alike in downturns, and hopefully Covid-19 will be no different. However, a common feature during downturns, even for companies that are successfully fundraising, are valuations that are lower (even significantly lower) than previous rounds. And here’s a situation where venture debt can step in to help the company and its founders raise part of this cash without the sting of that additional dilution. 

Also, if a leadership team is raising funds to shore up its working capital needs during this difficult time, raising equity to do so can be a pretty expensive exercise for shareholders (especially with the above in mind). Understanding your working capital needs, and balancing unnecessary equity dilution versus the cost of debt capital, will perhaps push leadership teams to view debt financing more favourably in such circumstances. 

Read More : The Venture Debt Investors Journey in Southeast Asia

Stable VC Presence & Funding in SEA

The Southeast Asia tech ecosystem will benefit from recently raised VC capital pre-Covid-19. In addition to the US$20 billion deployed across Southeast Asia tech companies in 2018 & 2019, an estimated additional US$4 billion of capital will be made available by funds for deployment in the region. Armed with this liquidity, VCs will deploy into companies with strong fundamentals and/or companies that can capture the value of markets in a post-Covid world. Together with VC funding, venture debt will be a valuable complement for companies looking to build-up their balance sheets during this time. 

If you’d like to explore raising venture debt as part of your overall capital needs, drop us a note and we’ll work with you to understand your needs.