MUFG launches Singapore venture debt business
Japan’s MUFG Bank has set up a Singapore-based venture debt business alongside Israeli financial technology start-up Liquidity Capital. Its debut fund has been set up with an initial $80 million.
The business, known as Mars Growth Capital, will be a 50-50 joint venture between the investors headed by Liquidity CEO Ron Daniel. MUFG Bank is the sole LP in Mars’ debut fund, which will target start-ups across Asia Pacific.
It follows an investment of $4 million last year in Liquidity from MUFG Innovation Partners, the bank’s VC unit. Part of the plan was to integrate the start-up’s technology into MUFG’s existing enterprise funding services with a focus on technology companies.
“Combining MUFG's superior network in Asia Pacific and market-leading financial expertise with Liquidity Capital's advanced technology enables the fund to provide promising start-ups with easy access to funding and unique financing solutions,” MUFG said in a statement.
“In addition to acquiring new client base, MUFG Bank will deepen its understanding of Liquidity Capital's advanced technology and seek opportunities for further collaboration to enhance the transformation of its business model in Japan and elsewhere.”
Liquidity offers a credit scoring model that relies on artificial intelligence to process real-time financial and accounting data from client bank accounts, accounting systems, and customer relationship management information. These data are used to forecast future earnings and cash flow of start-ups that do not have ready access to debt financing from financial institutions.
Venture debt has gained in popularity in Asia in recent years as a less dilutionary funding option for start-ups that also offers investors a lower risk profile with regular returns. Uptake is expected to accelerate amid coronavirus-related downturn conditions, including increased difficulty accessing traditional lines of credit. However, lenders targeting this opening face challenges around a heightened risk of defaults.
Recent activity around this theme in Singapore’s VC ecosystem includes a spate of COVID-19 dislocation fund launches and venture debt provider Genesis Alternative Ventures securing LP support for its debut fund from US-based Capria Ventures.
Venture debt is still an emerging asset class Asia Pacific, so importing expertise through interregional partnerships is a recurring theme. Recent success in tapping Israeli know-how includes Australia’s OneVentures teaming up with Viola Credit for its debut credit fund, which closed last month on $57 million.
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