Venture debt

Venture debt is an alternative source of capital for startups who are facing cash constraints and have difficulty obtaining financing from banks. It can help venture capitalist ("VC") backed startups in their growth journey and create an optimal funding structure, whilst enhancing stakeholders’ value.

Although an established alternative financing source in the US, Europe, Israel and India, venture debt has recently gained traction in Southeast Asia as a mainstream financing option for high growth technology companies.

Since its emergence in Singapore in 2015, the market has seen a marked increase in venture debt activity in the region. Considered an apt support to boost the local startup ecosystem, the Singapore government has introduced key programmes aimed at providing local early stage and high growth small and medium-sized enterprises an additional financing option for business growth and expansion.

Benefits of venture debt

Helps founders and VC-backed startups minimise shareholder dilution at early stages of the company’s growth

Allows the extension of cash runway between fundraising rounds, helping companies achieve performance targets set by equity investors

Supports companies facing unexpected market turbulence (e.g. economic impact arising from COVID-19) and helps speed up growth initiatives

Growing impact and potential

Amid COVID-19, venture debt has emerged as an important source of funding, propelling the startup ecosystem in Singapore and Southeast Asia. We see more companies turning to venture debt to quickly adapt to the new market conditions. With strong demand from startups and founders for venture debt, venture debt can help both sides thrive in the post pandemic world.

Key considerations for founders

Start a conversation

Take time to understand how venture debt works and the key terms that come with it

Plan for venture debt at the right moment

Raise it at the appropriate stage of your startup journey and consider raising in conjunction with an equity raise

Use venture debt to its strengths

Capital raised can be used flexibly to accelerate the company’s growth

Less dilution, but be aware

Instill discipline with regards to repayment timelines and be sure to adhere to other obligations imposed by the venture lender

Have a wider perspective

Transparency and predictability are important criteria in choosing the right venture lender

How we can help

In this fast-changing venture capital landscape, our specialists are able to provide value creating insights and market access to help your company achieve faster growth. We will work with you to help incorporate venture debt in an optimal funding structure for your business through:

Strategic advice on operational, commercial and financial aspects to identify and avoid any gaps
Guidance on financial or cash flow planning
Advisory support on fundraising
Guidance through the process including due diligence, strategic screening and review of new targets and investments.