By David Ramli, Chanyaporn Chanjaroen and Yoolim Lee
(Bloomberg) – Singapore’s Sassoon family is a retail powerhouse. As the clan that brought The Coffee Bean & Tea Leaf to Asia, they are often credited with helping to spark the Western-style coffee craze in the region. Now they want to foster another trend: loan financing to startups.
Genesis Alternative Ventures Pte, headquartered in family office Sassoon Investment Corp., plans to raise $ 70 million over the next 12 months for subprime debt financing, people familiar with the matter said. While venture capitalists typically buy stakes in companies through fundraising or bonds that can be converted into stocks, venture capital debt is a more subtle activity. This involves lending money to start-up businesses that may have difficulty borrowing from a bank, with relatively lower interest charges.
“Fairness is very expensive because you have to give up your actions,” said Ben Benjamin, co-founder of Genesis and son-in-law of Sassoon family patriarch Victor Sassoon. With risky debt, “the dilutions are much lower. It also gives startups good discipline. You learn to pay your bills, your interest, to build your credit history, ”he said.
Venture capital debt is significant in the United States, where giants like Silicon Valley Bank have used it successfully. In Singapore, however, where a number of startups have mushroomed, almost all venture capitalists focus on equity-type investments. Genesis believes risky debt will be of interest to entrepreneurs because risk financing doesn’t force founders to give up as many of their businesses.
Genesis loans will be accompanied by a warrant that will entitle Genesis to a small portion of the shares at a fixed price. So, for example, a $ 1 million loan taken out this year that is due to be repaid by 2024 could give Genesis the right to buy $ 200,000 of shares at a pre-agreed valuation.
Most of the large subprime credit companies that exist in Southeast Asia are linked to large financial institutions. InnovenCapital Pte, which raised $ 200 million in additional funding this month, counts Temasek Holdings Pte and United Overseas Bank Ltd. as shareholders. DBS Group Holdings Ltd. launched its own funding program for tech startups in 2015.
Benjamin’s other co-founders, Jeremy Loh and Martin Tang, left DBS’s risky debt business last year. The trio said an ideal borrower would be a Series B company with revenues of around S $ 1 million ($ 724,000).
Genesis has supported three startups so far: Horangi Cyber Security, which helps companies secure their online presence; online restaurant Cereals; and the coworking operator GoWork. Eight more are in the works, according to the company.
He also signed the Indonesian PT Bank CIMB Niaga as a strategic partner.
“In Indonesia, families have been operating for over 50 years now,” said Benjamin. “So we have quite a bit of infrastructure, knowledge of the market,” and CIMB Niaga has invested in Indonesian companies, he said.
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