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Data Vantage: Southeast Asia’s Venture Debt Opportunity
Valerie Law is a freelance writer.
8th of July, 2021
As businesses want to extend their runways or receive funding without compromising shareholder equity, Southeast Asian startups are increasingly turning to venture finance.
According to PwC estimates, the region’s potential venture debt opportunity is worth between $490 million and $980 million each year. The figures are based on a five-year average of venture capital in Southeast Asia ($9.8 billion per year) and a 5-10% share of the total pie.
PwC is the source of this information. Note that the statistics for 2021 are approximations. Venture debt is still a relatively new asset class in Southeast Asia, but it is gaining traction. According to a Kruze Consulting analysis, venture debt accounted for only 1-3 percent of overall venture capital in Southeast Asia in 2019, compared to 10% in the United States.
In February, the Singapore government extended and strengthened its Enterprise Financing Scheme – Venture Debt program to assist the growth of later-stage businesses, recognizing the importance of venture debt. From April 1, 2021, the government increased the maximum loan amount from S$5 million to S$8 million for new applications.
Experts believe Southeast Asia’s startup ecosystem will follow in the footsteps of India’s, which has used venture loans to fund its growth and expansion over the last decade. In India, venture loan financing is expected to account for around 8% of total venture funding in 2020, or approximately $800 million, up from 4% to 5% in prior years.
As a result of this increase, investors have been more interested in India’s venture debt funds, as they attempt to protect themselves against riskier pure equity bets on businesses. According to statistics from Venture Intelligence, the total amount raised by venture debt funds from private equity and venture capital debt funds increased from $62 million in FY 2019-20 to $85 million in FY 2020-21.
In India and Southeast Asia, a recent venture debt fund closed.
Genesis Alternative Ventures, a Singapore-based venture debt business, closed its first fund in April with a total of $80 million, exceeding its $50 million target. The fund, Genesis Alternative Ventures Fund I, was founded by the Sassoon family of Singapore.
Alteria Capital stated in December that it would close its second venture debt fund in the first half of this year, with a corpus of $1,000 crore ($134 million) and a green-shoe option of 750 crore ($101 million).
Genesis Alternative Ventures Alteria Capital
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