Today, start-ups in Singapore primarily rely on venture capital to fund their operations. By offering a dedicated venture debt solution to tech start-ups which are at the growth stage of their business life cycles, DBS is making available an alternative source of capital for these firms to tap on, with little or no dilution to their equity. Tech start-ups can use DBS venture debt for working capital, fixed assets acquisition and even project financing.
DBS’ venture debt solution is being rolled out amid growing demand for such financing. According to a report from the Singapore Venture Capital and Private Equity Association (SVCA), Singapore is the No. 1 market for start-ups in Southeast Asia.
Last year, USD 454 million worth of venture capital deals were done in Singapore, compared with USD 918 million invested in the rest of Southeast Asia.
The amount of venture capital invested in Singaporean tech firms by funds totalled USD 1.71 billion in 2013. While that was behind China’s USD 3.46 billion, it was ahead of Japan, South Korea and Hong Kong, according to data from Asian Venture Capital Journal.
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 USD 27.9 million, or 0.3%, in 2011.
Said Lim Chu Chong, Head of SME Banking, DBS Bank, "As the bank that sparked the development of Singapore, we are pleased to be one of the first banks in Singapore to offer venture debt as an alternative capital-raising option for tech start-ups. Tech start-ups 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. We hope this will be a boost to the start-up eco-system in Singapore and help innovative tech companies scale up and reach profitability at a faster pace."
Welcoming the initiative by DBS, Hau Koh Foo, Head of Innovation & Enterprise at National Research Foundation, said, "We are encouraged by DBS coming on board to play a more active role in offering tech start-ups alternative funding sources. This will complement the various initiatives rolled out by the Singapore government to enable start-ups to gain access to funding, and contribute to Singapore’s success as a start-up friendly nation."
Said Lim Kuo-Yi, Managing Director of Monk’s Hill Ventures, "We are pleased to partner DBS in offering venture debt to tech start-ups. It complements venture capital by helping our portfolio companies extend their equity runway to reach their key value inflection points, without unnecessary dilution or concern of losing more ownership."
Said Samuel Lim, CEO of Reebonz, "We applaud this initiative as it provides a viable alternative for young firms like Reebonz to diversify our funding options. Using a combination of equity and debt capital, start-ups can optimise their capital structure and strengthen their balance sheet ahead of the next round of venture fund raising."
Said Rosaline Koo, Founder of CXA and a DBS BusinessClass advisor, "For start-ups, it is important to partner a bank that has a suite of services and track record to support you through the various stages of your business, including an initial public offering or acquisition. With this new programme, DBS has demonstrated its commitment and ability to be a one-stop-shop for start-ups."
To qualify, tech start-ups must be strongly backed by DBS’ partner venture capitalists such as Vertex Venture, Monk’s Hill Ventures and Golden Gate Ventures. They should have raised at least SGD 1 million 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.
