An article written by Kontan.com. Read the full article here.

The period of the COVID-19 pandemic can be referred to as natural selection for business people, both large and small, including start-ups. The start-up business is considered to be one of the industries that quickly adapts and survives the pandemic.

To be able to continue to grow and accelerate business development, start-up companies need support, including in the form of financing. One of the banks that plays an active role in start-up financing is PT Bank CIMB Niaga Tbk (CIMB Niaga).

In 2019, the second largest national private bank in Indonesia began collaborating with a leading venture debt company in Southeast Asia, Genesis Alternative Ventures (Genesis) in channelling financing to start-up companies in the country with a total commitment of Rp. 300 billion.

CIMB Niaga Head of Commercial Banking Widodo Suryadi is optimistic that the start-up industry will play a significant role in supporting the Indonesian economy, especially in the current challenging conditions.

“We hope that the funding commitment we have prepared together with Genesis can be an alternative source of funding for potential start-up companies that have not met the criteria for conventional bank loans,” said Widodo.

Up to this point, the synergy between CIMB Niaga and Genesis has funded GoWork, a leading premium coworking space provider and Tanihub, an agriculture technology company.

Genesis co-founder and Managing Partner Dr. Jeremy Loh said he was very happy to have the trust of CIMB Niaga as a bank partner who wants to provide venture loans widely for potential start-ups in Indonesia.

Read the full article in Bahasa here.

An article written by The Edge Singapore. Read the full article here.

With no lack of investors, venture capital firms, incubators and accelerators are seeking new ways to attract the next billion-dollar start-up.

For countries like Singapore aspiring to be the next start-up hub, the government must create a network of related innovation campuses and open its doors to global talent even as it provides tax incentives and cash grants.

But most importantly, start-ups need venture capital (VC) firms, incubators and accelerators willing to risk their time, effort and money to mentor and fund them during the development and commercialisation phases.

It therefore comes as no surprise that a large number of VC firms have set up shop in Singapore, all convinced they can find the next unicorn or start-up valued at over US$1 billion ($1.4 billion) to nurture.

But as the pool of high net worth individuals, VC firms and institutional investors expand, so do their need to innovate and create new investment strategies to differentiate themselves from the others and attract the most promising start-ups.

One example is Genesis Alternative Ventures, which calls itself Southeast Asia’s first private venture debt fund. Rather than going via the usual cash-for-equity route, it invests in a start-up’s debt. Simply put, Genesis provides the start-up with loans of about 20% to 30% of the equity funds it is able to raise. This loan will last for a term of three years and have less stringent loan approval requirements than banks.

Read the full article here.

In a tech ecosystem affected by an uncertain environment, could venture debt be a white knight to save startups in Southeast Asia?

Venture debt, a type of financing typically used by early-stage companies and startups, first gained prominence in Southeast Asia around 2015. In the US, however, it has long been a fixture on the market, with 35-year old industry pioneer Silicon Valley Bank (SVB) backing around 50% of venture-capital-backed companies with IPOs in 2017.

Venture debt brings significant benefit as a complementary form of financing as capital that is almost equivalent to equity without dilution. For small and medium enterprises (SMEs), debt capital can also bring an optimum cost of capital.

– Jeremy Loh, Co-founder and managing partner at Genesis Alternative Ventures

General financing parameters in venture debt have not changed much, despite recent variability in demand and market conditions in wake of COVID-19, according to Loh. Genesis Alternative Ventures typically funds between USD 1 to USD 5 million dollars, while Innoven Capital typically carries out a 20% funding round with loan durations typically among two to three years long, similar to pre-COVID financing structures.

Both venture debt providers emphasized that their general funding structure and terms remain sensitive to the company’s purpose. In addition, bespoke conditions may be offered to tailor to each company’s circumstances.

Yet, despite the arguably increasing popularity of venture debt in Southeast Asia, it is yet too early to conclude that this will become a mainstream form of financing for startups, even with COVID-19 as an accelerator of change, and promising venture debt providers like Innoven Capital and Genesis Alternative Ventures in play

Read the full article here:

https://kr-asia.com/will-venture-debt-be-a-white-knight-for-startups-in-southeast-asia

When start-ups accept money from venture capitalists, the founders are often asked to give up a significant portion of their ownership in return for additional equity financing. Venture debt funding is an alternative way for start-ups to raise funds, minus the equity dilution.

When you have to sell equity in your company to raise money to buy, for example, depreciating assets, it is an expensive exercise.

-Ben Benjamin, Co-founder and partner of Genesis Alternative Ventures

The venture debt business model also benefits the venture fund as it brings about at least two streams of income. The first is the interest payable on the loan from the borrower, and the other is warrants. But why would a start-up turn to a venture-debt fund instead of a bank for a loan?

Banks have more stringent requirements and criteria when approving loans to companies. The banks typically want some semblance of earnings before they are willing to lend. The very nature of start-ups is often prioritising growth over profitability, which unchecks this box right away. This is where Genesis comes in.

Read the full article from The Edge Singapore here.