DBS launches venture debt for tech startups in Singapore

• For growth-stage startups; partner VCs are Vertex, Monk’s Hill and Golden Gate
• US$454mil worth of VC deals done in Singapore last year, US$918mil in rest of SEA

DBS Bank has launched a programme to provide financing to tech startups, although it did not state how much capital is being set aside for this venture debt initiative.
 
Startups in Singapore currently rely primarily on venture capital to fund their operations. By offering a dedicated venture debt solution to tech startups which are at the growth stage of their business life cycles, DBS said it is making available an alternative source of capital for these firms to tap on, with little or no dilution to their equity.
 
Tech startups can use the DBS venture debt for working capital, fixed assets acquisition, and even project financing, the bank said in a statement.
 
“Tech startups 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,” said Lim Chu Chong, head of SME Banking at DBS Bank.
 
“We hope this will be a boost to the startup ecosystem in Singapore and help innovative tech companies scale up and reach profitability at a faster pace,” he added.
 
To qualify, tech startups must be strongly backed by DBS’ partner venture capitalists such as Vertex Venture, Monk’s Hill Ventures or Golden Gate Ventures.
 
They should have raised at least S$1 million (approximately US$745,000) of Series A funding, be incorporated for at least two years, be in operation for at least one year, and have demonstrated that their business model is commercially viable.
 
“We are pleased to partner DBS in offering venture debt to tech startups,” said Monk’s Hill Ventures managing director Lim Kuo-Yi.
 
“[This would help] our portfolio companies extend their equity runway to reach their key value inflection points, without unnecessary dilution or concern of losing more ownership,” he added.
 
According to a report from the Singapore Venture Capital and Private Equity Association (SVCA), the city-state is the No 1 market for startups in South-East Asia.
 
Last year, US$454 million worth of venture capital deals were done in Singapore, compared with US$918 million invested in the rest of South-East Asia. The amount of venture capital invested in Singaporean tech firms by funds totalled US$1.71 billion in 2013, DBS said.
 
While that was behind China’s US$3.46 billion, it was ahead of Japan, South Korea and Hong Kong, according to data from the Asian Venture Capital Journal, DBS added.
 
Funding devoted to Singapore’s tech firms, including from the Government, skyrocketed in 2013 to account for 19% of funding for Asia. This is up from just US$27.9 million, or 0.3%, in 2011.
 
“We are encouraged by DBS coming on board to play a more active role in offering tech startups alternative funding sources,” said Hau Koh Foo, head of Innovation & Enterprise at the National Research Foundation.
 
“This will complement the various initiatives rolled out by the Singapore Government to enable startups to gain access to funding, and contribute to Singapore’s success as a startup-friendly nation.”
 
For more information, follow the ‘DBS VentureDebt’ topic on the DBS BusinessClass app, which unfortunately is only available for the iOS and Android platforms.
 
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