United Overseas Bank (UOB) and Temasek’s joint venture, InnoVen Capital (InnoVen), has entered into two venture debt financing agreements with Southeast Asian e-commerce startups. These startups are part of a group of 20 companies from Southeast Asia, India, and China that InnoVen has selected for venture debt funding in the coming six months. The targeted sectors include e-commerce, financial technology, logistics, and big data.

During the first quarter of this year, InnoVen secured financing deals with Malaysia-based KFit Holdings, an e-commerce health and fitness company that has received funding from Sequoia Capital, and Thailand-based Pomelo Fashion, an e-commerce fashion company backed by Jungle Ventures.

Both companies intend to use the venture debt loans to expand their operations within the region. InnoVen will provide a total of US$5 million in loans to assist KFit Holdings and Pomelo in catering to the fitness and fashion preferences of Asia’s expanding affluent population, which is projected to represent two-thirds of the global middle class, roughly 3.2 billion people, by 2030.

InnoVen has identified Pomelo Fashion as a company with significant growth potential. This company utilizes e-commerce to market and sell its apparel, accessories, and footwear to the increasingly affluent demographic in Southeast Asia. Casey Liang, Co-Founder of Pomelo Fashion, stated, “For a startup like Pomelo, funding is frequently crucial as we accelerate our growth, venture into new markets, and invest in new capabilities. The venture debt from Innoven will enable us to achieve these objectives more effectively. Innoven has been an exceptional partner who comprehends our business dynamics and was able to customize a financing structure that aligns with our business requirements.”

Eric Tham, Managing Director and Head of Group Commercial Banking at UOB, emphasized the significance of venture debt in fostering Asia’s entrepreneurs and promoting innovation. “UOB was founded by entrepreneurial individuals and has been supporting the growth of SMEs for over eight decades. We recognize the crucial role enterprise plays in economic growth and are dedicated to ensuring that the most promising startups receive the necessary funding support to evolve into world-class businesses. This, in turn, will contribute to driving the economies of Asia,” stated Tham.

Chin Chao, CEO of InnoVen, Southeast Asia, commented: “InnoVen’s current momentum underscores the importance of venture debt as an alternative funding source to traditional equity financing from venture capitalists. As part of InnoVen’s investment strategy, the company is actively seeking companies with unique business models that possess the potential to become leading global enterprises.”

A few days prior to the venture debt announcement, InnoVen Capital had disclosed the commencement of its operations in Southeast Asia. Ajay Hattangdi, Group COO and CEO India, explained, “We remain committed to investing significantly in building our India business while also aiming to support our clients and their investors across various markets. Having a unified platform throughout the region allows us to work seamlessly with clients who are increasingly seeking expansion beyond a single market and, therefore, require risk capital across different geographies. We are focused on leveraging our experience in working with high-growth startups and our strong relationships with VC investors to create a regional platform for InnoVen Capital.”

UOB and Temasek have each pledged up to US$100 million in paid-up capital to InnoVen, which was established in 2015 to provide rapidly growing 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 estimated at US$2.2 billion. InnoVen Capital recently disclosed the successful completion of over 100 venture debt deals in India, disbursing over Rs275 crore across 27 transactions in 2015. The company achieved a 100% year-over-year growth in terms of both client numbers and loan volumes. For the current year, InnoVen Capital aims to provide fresh funding exceeding US$65 million.

Venture debt financing represents a component of UOB’s commitment to supporting the growth of Asian enterprises, ranging from startups to publicly listed companies. The bank offers a comprehensive suite of financing solutions, encompassing equity crowdfunding, venture debt financing, term loans, and capital market solutions.

*Venture debt is a form of loan extended to venture capital-backed startups to help them address their funding requirements and finance their business expansion.

**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