DBS launches Singapore venture debt program

Typical targets will be companies at a growth stage in their business life cycles that require financing for working capital, fixed assets acquisition or project financing. In the absence of well-developed funding channels, many start-ups in Asia rely on equity - which is suited to long-term costs - to cover short-term expenses. Venture debt is another option.

Venture debt packages are usually structured on top of a larger round of equity funding. For example, if a start-up raises a Series A round of $5 million, the venture debt provider would contribute an additional layer of $1-2 million. Debt providers tend to work alongside VC firms with which they are familiar.

DBS has entered into partnerships with several local venture capital firms, including Temasek Holdings-owned Vertex Venture, Monk's Hill Ventures and Golden Gate Ventures. To qualify for venture debt, start-ups must have raised at least S$1 million ($740,000) in Series A funding from one of these partners.

They must also have been incorporated for at least two years and in operation for at least one year, and have demonstrated that their business model is commercially viable.

"Tech start-ups can use venture debt to complement venture capital, and buy more time and flexibility for their businesses to hit key development milestones, which can potentially increase their company valuations. We hope this will be a boost to the start-up eco-system in Singapore and help innovative tech companies scale up and reach profitability at a faster pace," Lim Chu Chong, head of SME Banking at DBS, said in a statement.

Venture debt is an established product in developed economies and is beginning to gain traction in certain emerging markets. Several groups now offer venture debt in India and longest-standing incumbent, Silicon Valley Bank's SVB Finance, was recently bought by Temasek.

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• Topics
• Financing
• Venture
• Southeast Asia
• Technology
• Singapore
• Venture
• Structured finance
• Southeast Asia
• Golden Gate Ventures
• Vertex Management (II)
• Technology