In the first quarter this year, InnoVen signed financing deals with Malaysia-based KFit Holdings, an e-commerce health and fitness company that has raised funding from Sequoia Capital, and Thailand-based Pomelo Fashion, an e-commerce fashion company which is backed by Jungle Ventures.
Both companies will be using the venture debt loans to develop their business in the region. InnoVen will provide loans totalling US$5 million to help KFit Holdings and Pomelo cater to the fitness habits and fashion trends of Asia’s growing affluent population, which is expected to account for two-thirds of the world’s middle class consumers or about 3.2 billion people by 2030**.
Pomelo Fashion has been identified by InnoVen as having high growth potential. The company uses e-commerce to market and to sell its brand of apparel, accessories and footwear to the rising affluent in Southeast Asia. Casey Liang, Co-Founder of Pomelo Fashion said, “For a startup such as Pomelo, funding is often critical as we accelerate our growth, expand into new markets and invest in new capabilities. The venture debt from Innoven will help us accomplish these goals more efficiently. Innoven has been a great partner who understands our business dynamics and was able to tailor a financing structure that met our business needs.”
Eric Tham, Managing Director and Head of Group Commercial Banking, UOB, said venture debt is important in nurturing Asia’s entrepreneurs and in encouraging innovation. “UOB was formed by enterprising minds and has been supporting the growth of SMEs for more than eight decades. We see the importance enterprise plays in economic growth and are committed to ensuring that the best startups have the necessary funding support to develop into world-class businesses. This in turn will help to drive the economies of Asia,” said Tham.
Chin Chao, CEO of InnoVen, Southeast Asia, said: “The current momentum of InnoVen demonstrates the importance of venture debt as an alternative funding source to traditional equity financing by venture capitalists. As part of InnoVen’s investment mandate, the company is seeking companies with differentiated business models that have the potential to become leading global businesses.”
InnoVen Capital had announced the start of its operations in Southeast Asia a few days before the venture debt announcement. Ajay Hattangdi, Group COO and CEO India said, “We continue to invest heavily in building our India business but also want to be able to support our clients and their investors across markets. Having one unified platform across the region helps us to work seamlessly with clients who are increasingly looking to expand beyond just one market and therefore have requirements for risk capital across geographies. We are seeking to leverage our experience of working with high-growth startups and close relationships with VC investors in creating a regional platform for InnoVen Capital.”
UOB and Temasek have each committed up to US$100 million in paid-up capital to InnoVen, which was set up in 2015 to provide high-growth and innovative Asian startups with up to US$500 million in venture debt loans over the next five years. According to an EY report on venture debt***, the potential market size for venture debt in Singapore, China and India between 2015 and 2019 is US$2.2 billion. InnoVen Capital recently announced the completion of over 100 venture debt deals in India by disbursing over Rs275 crore across 27 transactions in 2015. It witnessed 100% growth over the previous year in terms of number of clients and loan volumes. This year, InnoVen Capital aims to provide fresh funding in excess of US$65 million.
Venture debt financing is part of UOB’s commitment to support the growth of Asian enterprises, from startups to listed companies. The bank offers end-to-end financing solutions such as equity crowdfunding, venture debt financing, term loans and capital market solutions.
*Venture debt is a type of loan provided to venture capital-backed startups to help bridge their funding needs and finance their business growth.
**Brookings Institution, The New Global Middle Class: A Cross-Over from West to East, March 2010
***Building a venture debt business in India, China and Singapore, EY, 28 August 2014