INVESTMENT

Singapore’s UOB, Temasek offer US$500 million to start-ups in Asia

PUBLISHED : Thursday, 23 July, 2015, 8:48pm
UPDATED : Thursday, 23 July, 2015, 8:48pm

Singapore’s United Overseas Bank (UOB) and government-owned investment firm Temasek Holdings will offer up to US$500 million in venture debt financing to start-ups in China, India and Southeast Asia, it was announced this week.

The two revealed their new partnership on Wednesday. Over the next five years, it will finance “high-growth, innovative start-up companies” in the technology, consumer, healthcare and clean technology sectors, UOB said.

The start-ups must already have a first round of venture capital funding behind them, the bank added in a statement.

Venture debt financing is a form of investment similar to bank lending. It appeals to companies that lack positive cash flows or significant assets to use as loan collateral. In return, companies offer some stock to the investors.

“This new pan-Asian venture debt financing initiative will seek the next generation of leading companies, providing the support they need to scale and succeed,” said Ong Beng Teck, managing director of Temasek’s enterprise development group.

This is the first time a government-supported initiative in Singapore will help to fund overseas start-ups in Asia. 

Under the agreement, UOB will purchase a 50 per cent stake in Temasek subsidiary Innoven Capital, the largest provider of venture debt in the Indian market.

Both UOB and Temasek will each contribute up to US$100 million to Singapore-based Innoven Capital, with plans to establish subsidiaries in China and Singapore in the coming months.

According to business consultancy Ernst & Young, the market for venture debt in China, India and Singapore combined could be worth US$2.2 billion.

Singapore has been pushing to support entrepreneurship and Singapore-based start-ups in hope of cementing its position as the region’s start-up hub. 

It backs Block 71, one of Southeast Asia’s largest business incubators, which offers cut-price office space to young start-ups in specialised fields like tech and biology.

In February, Singapore unveiled plans to pilot a venture debt financing initiative, shouldering 50 per cent of the risk with partner banks to finance local start-ups.